LOL! said:
This is an interesting discussion to me. When one has a couple of COLA pensions, one could argue that they are like bonds and allow one to take on more risk in they normally would.
Sounds logical, and it's an asset-allocation issue.
LOL! said:
But one could make the counter argument that with COLA pensions, you are gonna be all set for retirement and you do not need to take on as much risk and try to get a higher rate of return because you got those pensions to back you up.
This sounds more like an emotional debate. It's certainly illogical to be concerned about taking risks with money that you don't need. That's pretty much my definition of "riskless".
If I don't need the money, then why would I care what could happen to it? Perhaps the most Vulcan-logical thing to do would be to give the money away to charity or to hire a professional money manager. I'd have put the money in the hands of someone who needed it or someone who'd be willing to figure out what to do with it. Then I could stop worrying and sleep better at night.
If I cared about the money then that could imply that I thought I might need it. In that case I'd try to quantify the need and perhaps hedge my bets-- half into I bonds for my long-term care fund and half into small-cap international emerging-market b33ver-cheeze futures. On margin. After all, I have what I need and I couldn't care less what happens to the rest. In fact maybe I should put it all on black at the Bellagio.
If I was just worried that I'd screw up my stewardship of the money then I'd try to figure out what would provide the best long-term return-- after all, I don't need the money so I might as well go for historical performance with minimal expenses. In that case I'd put it all in equities-- perhaps a world equity fund or a split between international equities and the Wilshire 5000. I might buy a couple hundred individual stocks (thus reducing my annual expenses to zero) or buy low-ER ETFs or index funds. And I'd reinvest the dividends.
Or I could decide that, since I didn't need the money, I'd spend it on things I didn't need-- college scholarships for my local high school, a Ferrari Testarossa, a month-long sabbatical at the Chicken Ranch, a world tour aboard the QEII, or annual gifts to all my family & relatives. Take your choice, or take your vitamins and try for all of the above.
I certainly wouldn't bury it in the back yard-- or in Treasuries.
BTW Tweedy, Browne's literature brought up this question for a retired woman with "more than enough" who had no idea how to invest the rest. She spent some of it, gave some away, set some aside for her family (grandkid college funds, house down payments), and invested the rest in Berkshire Hathaway.
LOL! said:
Rick's a good writer and I've read most of his stuff but I can't tell which of the 16 chapters you're specifically referring to here. Are we still talking about investing money that's not needed?