Early Retirement & Financial Independence Community - View Single Post - Swedroe comments on buying individual stocks.

wabmester · 10-11-2005, 09:10 PM

Well, I did pick MSFT, INTC, etc in the 80's. But I also bet big on Japan, Inc. That was a brilliant move till about 1990....

Japan represents one of those low-probability bad outcomes I keep yammering about. Perhaps the fastest growing economy in the world. It became the second biggest economy in the world. Lots of smart, hard working people that were kicking our butt in consumer electronics and automobiles.

So, what happens to CT-San in a hypothetical alternate universe?

The year is 1990. CT-San is 55 years old and made a killing in the stock market, so he decides to retire early. He asks his guru Sensei Swedroe for investment advice. Swedroe says to be conservative: 50% in total market index, 50% in short-term bonds.

Cut to the present. CT-San is now 70 years old. His stock investments are worth 25% of their initial retirement value, and that doesn't account for withdrawls. His bonds yield around 1%. CT-San is hosed.

Low probability. Serious consequences. Avoid that combination, even if it means giving up some upside.

10-11-2005, 09:10 PM	#17
wabmester Thinks s/he gets paid by the post Join Date: Dec 2003 Posts: 4,461	Well, I did pick MSFT, INTC, etc in the 80's. But I also bet big on Japan, Inc. That was a brilliant move till about 1990.... Japan represents one of those low-probability bad outcomes I keep yammering about. Perhaps the fastest growing economy in the world. It became the second biggest economy in the world. Lots of smart, hard working people that were kicking our butt in consumer electronics and automobiles. So, what happens to CT-San in a hypothetical alternate universe? The year is 1990. CT-San is 55 years old and made a killing in the stock market, so he decides to retire early. He asks his guru Sensei Swedroe for investment advice. Swedroe says to be conservative: 50% in total market index, 50% in short-term bonds. Cut to the present. CT-San is now 70 years old. His stock investments are worth 25% of their initial retirement value, and that doesn't account for withdrawls. His bonds yield around 1%. CT-San is hosed. Low probability. Serious consequences. Avoid that combination, even if it means giving up some upside.