Martha said:
The curse of the housewife.
Haven't we heard for years from women who stay at home that their contributions are minimized? My mother, who didn't "work outside the home" died when 4 children were under twelve and two were still in diapers. I remember my father saying years later that it cut his income in half.
Ding ding ding. I do all the repairs and maintenance on the house and cars, most of the cleaning, most of the shopping, almost all of the cooking, and about 60-70% of the baby care. Basically my wife has to work 2-3 days a week, do a little house cleaning, and watch the baby here and there.
So I'm reducing our need to spend a lot of our income and holdings, and our kid gets to grow up with one parent almost full time and the other around almost all the time. Which may or may not be good considering the parental material.
I guess I'm going to have to take further umbrage with the 'human capital' term. It has a definitive meaning.
Dictionary:
Human:
A person
Capital:
1. Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation.
2. Material wealth used or available for use in the production of more wealth.
3. Human resources considered in terms of their contributions to an economy: “ [The] swift unveiling of his... plans provoked a flight of human capital” (George F. Will).
#3 seems to strike gold...
So Milevsky is either taking some rather extreme editorial repositioning in his definition, or he really needs a better term. Methinks he's made the classic mistake of defining a person by how much earned income they generate. Sort of the antithesis of a group of early retirees. Or maybe Milevsky is a socialist/communist?
I would argue that with a seven figure investment portfolio, expenditures well above the median, and full time parenting of a child such that he becomes as productive as he chooses to be, all have a rather fundamental impact on the economy. Certainly in excess of someone flipping burgers or pushing paper around a desk; who in this context would have greater "human capital" than I do? I think not.
As far as equities, any volatile investment can be frightening. Life itself is scary due to its volatility. We avoid change and very few of us can take on uncertainty.
For those very reasons, an investor gets paid the risk premium. As Nords has said, no other investment allows overcoming inflation AND providing a reasonable rate of return on ones money. You can punt on first down or just run the ball, and play good defense (LBYM) and eke out an existence. I dont think that playing to not lose works for you in any 'game'.
Oddly enough, our fear of change and risk causes us to make grave changes that put us in dire risk or causes us to employ strategies that may not work, and the failure point of those strategies is likely to be when we're very old and cannot recover from them.
As far as "having a dramatic effect on what can be taken out down the road", you're right. You'll be able to take out a lot less with an all bond or mostly bond portfolio.
Unless you can predict the "downturn" or period of poor returns, its a fools game.
By the way, we havent had a period of poor returns in 40 years. We havent had a prolonged downturn in 80. This aint earthquakes and 500 year floods we're talking about where the odds are there waiting for the dice to roll the wrong way.
