MONEY (photo illustration)—Getty Images (1)
By Ian Salisbury
December 26, 2014

Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For MONEY’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of retirement, technology, health care, real estate, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these five investing innovations.

Best Way to Get Advice Cheaply

In 2014, Internet-based “robo-advisers” went from a novelty to a force that’s changing how you get and pay for money advice. In a nutshell: They’re driving costs to the floor. Some of investing’s biggest names are going robo. The competition breaks down into two types:

Portfolio Builders: Startups like Betterment and Wealthfront use algorithms to design you a mix of low-cost index funds. They charge no more than 0.25% to 0.35% of assets per year, less than traditional advisers. Giant Schwab has announced a similar, free service. (Schwab is paid in part by putting customers into Schwab’s funds.)

Computers plus people: LearnVest is more focused on saving and budgeting, but for $70 a month it will also connect you with a financial planner for investment and other advice. Vanguard’s new Personal Advisor Services will create a portfolio for you, and assign you a planner you can talk to, for 0.3% per year. The pilot program is open to existing customers with $100,000 to invest.

Best Answer to Your Toughest New Problem

With the Fed ending quantitative easing, the big worry is when interest rates will rise again. Since bond values fall when rates rise, the bonds you own for safety suddenly feel high-risk. But Colorado Springs financial planner Allan Roth says a look at the numbers should dampen your worry, as long as you have a long-term focus. After the initial drop, the higher yields you’ll get in bonds can help make up for the fall. Many Fed observers expect rates to rise one percentage point next year. Below is what happens in a typical bond fund if rates spike twice as much, by two percentage points, and then flatten out.

Best Timely Trick for Finding Bargain Stocks

Count All the Cash

When you’re hunting for a bargain stock, a rich dividend is a classic place to start. A big payout is a sign that a company has to do something extra to attract buyers. And a firm with cash to distribute may be more stable than other unloved stocks. But dividend yields average just 2% these days.

The concept: “If you just look at dividends you ignore a significant piece of the pie,” says portfolio manager Patrick O’Shaughnessy of O’Shaughnessy Asset Management. Also add in stock buybacks, which can be a better use of cash than costly acquisitions often are. To do that, calculate “shareholder yield.” A company paying 2% that bought back 3% of its shares in a year would have a 5% shareholder yield.

The new way to invest: Cambria Shareholder Yield ETF (SYLD) buys stocks that score high on this measure.

Best Reason to Be Skeptical About Market-Beating Claims

Many new mutual funds and ETFs are based on the idea that by combing through past market returns, you can identify factors (such as company size) that explain why some stocks do better than others. But a new study by financial economists Campbell Harvey, Yan Liu, and Heqing Zhu argues that many of these discoveries are probably illusory. With the advent of cheap, powerful computers, academics are making more and more “discoveries”—over 200 just in the past 15 years. The sheer number of findings, the study argues, suggests researchers are simply picking up a lot of random noise.

Best Big Idea in Three Characters


That’s economist Thomas Piketty’s formula for economic inequality. In Capital in the 21st Century, Piketty says the return (r) on owning capital tends to be faster than economic growth (g). If he’s right, the rich will pull away from the rest. And it’s a reason to own stocks and other long-term assets.


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