From: "altamira" <altamira@ecpi.com>
>In the chart you link to, the bonds are long term and were subject
>to more years of inflation than deflation during the years
>covered. This would not be the case with the strategy I suggested
>of buying only short term bonds. I agree that T-bills are not a
>good investment for the long term.
>As the standard deviations for the 3 asset classes indicate, stock
>returns are far more volatile than returns on bonds. If you take
>a smaller assortment of stocks, which is what most people end up
>with, the volatility will be even greater. Most people, if they
>purchase stocks for their own portfolios, can't afford to
>diversify widely, and mutual fund managers don't seem to have all
>that good of a track record. Some volatility wouldn't hurt if you
>were prepared to hang on for the long term, it's true. And a
>person could transfer their money out of stocks and into bonds at
>retirement age when they want to withdraw money periodically. But
>what if a person reached retirement age just as the market went
>into a slump of several years'duration? Also, some of the
>volatility which appears negligible on a chart translates into
>rather severe losses for the individual investor.
>Your info comes closer to changing my mind than other stuff I've
>seen, Rob, but I'd still feel queasy advising someone to put their
>life savings into the stockmarket.
Hey Bonnie,
The original numbers I quoted were from one of Peter Lynch's books.
The Motley fool usually uses 10.5% as it's number. I couldn't find
the data easily on a quick pass through the Fool website, the
numbers I'm looking for are on the very page of the "Motley Fool
Guide To Investing" I was reading this morning, but unfortunately
I left it at home.
A quick web search did turn up these numbers: Stock Market 1926-
1999 average 11.3% annually from:
www.vanguard.com/educ/lib/plain/stocks.html
One heuristic for a balanced portfolio goes like this:
Agressive investor: 120 - age = percent invested in stock
Moderate Investor: 110 - age = percent invested in stock
Conservative Investor: 100 - age = percent invested in stock
other common rules:
1) Pay off non-deductable debt first, 0% credit card balances.
2) Have a month to a years expenses in a money market account/
short term investment vehicles (T-bills etc)
3) Don't put anything in the market you're going to need in the
next three years. (others suggest 5)
Most of what I have invested currently (I'm at step 1&2) is in a
tax-deferred equity fund thats part of a Union benefits package. We
have a limited number of choices, but I have 100% invested in a S&P
Index fund. (better long term than the so called "growth" fund.)
Putting my money where my mouth is. (Go Lakers, $100 short term
investment)
Brian
Member:
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