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Re: Another SWR question
Old 10-29-2004, 08:36 PM   #21
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Re: Another SWR question

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If it is paying 7% tax free with no loads why isn't everyone just pouring everything in.
That wouldn't be the way to go for many reasons. It would pose some very serious risks to dump all of your assets into one section of the market. Diversification is crucial.

Here is a link to an excellent discussion about expected future returns:

http://www.vanguard.com/bogle_site/sp20030605.html

But check out Bernstein's book. Actually, there may be some others you should read first to get a feel for the subject. His book is the best I've read, but I don't think you'd want it to be the first - you might try Personal Finance for Dummies by Eric Tyson. The title is goofy, but the book is excellent and won't lead you astray (many will). Bernsteins book is excellent, but there's an assumption you already know the basics, IMO.
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Re: Another SWR question
Old 10-29-2004, 08:54 PM   #22
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Re: Another SWR question

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VanGuards fund sounds like the better choice.
Possibly, but not because they had a higher return in the past five years. The returns I posted were NOT meant to imply that you should buy a Vanguard fund because they had a higher return over the past five years. It was meant to illustrate that you have been paying high expenses all those years for nothing. It was wasted money.
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Inflation, that's why.
Old 11-04-2004, 09:18 PM   #23
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Inflation, that's why.

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If it is paying 7% tax free with no loads why isn't everyone just pouring everything in. *On 1M 70K tax free sounds good to me.
This isn't a CD-- bond yields vary. $70K may sound good this year, but it won't necessarily improve unless you keep adding or reinvesting more money into the fund. Even if the fund stays at $1M and continues to yield 7% (neither of which will happen every year!), then every year you'll lose a little to inflation.

If the CPI rises 3% next year (which many of us feel is too low and doesn't represent the actual inflation rate) then that $70K becomes $67,900. 10 years of 3%/year inflation will reduce it to $51K. In 30 years you'd have $28K purchasing power.

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