Computer Passwords: Heard Any Good Ones Lately?

Computer passwords are no laughing matter.

Add "getting serious about my computer passwords" to your list of 2013 new year's resolutions.

Everyone knows you should floss your teeth often, and a lot of people do.

Everyone also knows you should have complicated passwords (and more than a handful), but few people do.

The Worst Passwords Ever

According to Jennifer Waters in The Wall Street Journal, "The annual compilations of 'worst passwords ever' are numerous but remarkably similar in their results. Moreover, the top 25 or so passwords are held by an alarmingly large number of people." Wondering what some of the worst passwords are? If your password is "password," "football," "qwerty," "11111" or any other common combination of letters or numbers, you should think about changing it.

"Computer hackers don't just sit around typing in passwords to websites at night." [Tweet this]

They have computer software programs that do it 24/7. If they hack passwords from a retailer, for example, they barrage major bank websites like Bank of America, Chase Bank, Citigroup and Wells Fargo to see what their "phishing" can catch.

Think of a Story

The best way to remember large numbers of passwords, according to Markus Jakobsson, a security research expert and advisor to the newly formed Council for Identity Protection, is to think of a story. Then come up with three words to describe the story. Customize it for different websites by adding a different color to the end, like red, white or blue.

Group Your Passwords

Identify different groups for your passwords list (for example, financial accounts, social media and retailers). Use different stories for different groups of accounts. Customize each story with a different ending so no two websites have the same password.

Software to the Rescue

Fight fire with fire. Consider using a password management software program. Popular programs include RoboForm Everywhere, Sticky Password, Kappersky Password Manager, DataVault and Handy Password Manager.

Imagine a few memorable stories and start your new year off right with new passwords!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Stock Pickers Losing the War

When it comes to investing, the "active" versus "passive" management battle continues. What is it all about?

"Active" management describes investment advisors who think they can buy individual stocks and bonds that will perform better than the stock or bond market as a whole. For example, they buy Coca-Cola but not Pepsi, Apple but not IBM, or Macy's but not Target.

"Passive" management describes investment advisors who buy all of the securities in a market index in the proportion owned by the index. For example, they buy all 500 stocks in the Standard & Poor's 500 Index in the proportion that each stock is weighted in the index. The top five holdings would be Apple, Exxon Mobil, General Electric, Chevron and IBM. (Procter & Gamble is the eighth-largest holding, for those of you with Cincinnati roots.)

Investors Vote with Their Feet

In 2012, according to The Wall Street Journal, investors pulled about $120 billion dollars from actively managed funds, the largest yearly outflow since 2008, while pouring about $155 billion in to passively managed investments, the largest inflow since 2008.

Why Passive Management?

There are two key advantages to passive management.

"The advantages of passive investment management are hard to beat." [Tweet this]

1. Cost. Passive funds have significantly lower management fees and expenses. According to The Vanguard Group, one of the largest passive fund companies, its passively managed funds are 82% less expensive than the industry average. This is particularly important for bond funds in a low-interest-rate environment.
2. Diversification. Passive funds own more securities so there is less specific security risk. More important is the performance of stocks an actively managed fund doesn't own. If an actively managed fund doesn't own just a small handful of the top-performing stocks, it will under-perform.

The battle between active and passive management has raged for years and will continue to do so. The advantages of passive management, however, are hard to beat.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.