Comments on: Meeting Future Goals Without Stocks – Just Save LOTS More Money!

By: » The High Cost of Low Risk Investing

» The High Cost of Low Risk Investing — Wed, 25 Feb 2009 04:11:25 +0000

[...] I invited Dylan to write this as a followup to an article by JLP of AllFinancialMatters which considered the costs of meeting your financial goals without stocks. Thanks [...]

By: Jerry004

Jerry004 — Sat, 06 Sep 2008 23:05:47 +0000

Returns from 1926 to 2006 were great in the stock market, especially since there was a pristine global environment to exploit and a relatively low global population. But we aren’t going to see those glory days again, so isn’t it more likely that enviromental problems brought about by overpopulation and over-exploitation will put a huge dent in stock gains over the next 20 years? I think so. I think the world will increasingly resemble Haiti in the next 20 years — overcrowded, poor and chaotic. Therefore, T-bills are probably the best route.

By: GrowYourFunds

GrowYourFunds — Thu, 13 Sep 2007 04:45:13 +0000

Around the investment blogging world

Today I want to start what a series that I will call "Around the investment blogging world." In these posts I will link to some posts from other investing blogs that are worthy of GrowYourFunds readers attention. It will be my…

By: fivecentnickel.com

fivecentnickel.com — Sat, 25 Aug 2007 20:17:58 +0000

Andy: Remember, the stock scenario assumed you were saving *way* less money, so the concerns that you expressed can be remedied by ratcheting up your savings a bit (but still well below the bond or cash scenario). In reality, you’re going to invest in a mix of asset classes, so the truth in all of this is somewhere in between. The bonds will serve to stabilize the portfolio, whereas the stocks will supercharge the returns.

By: Andy

Andy — Fri, 24 Aug 2007 22:41:52 +0000

“Another point to make is that this was a pass/fail test, so even if the simulated results yielded $1,806,110 ($1 shy of the goal) after 20 years, it was counted as unsuccessful.”

That will favor bonds much more. With stocks you have a very real possibility of *SIGNIFICANTLY* missing your goals due to the high std deviation. If you are unlucky and get the bottom 5% or so of returns you will be pretty screwed.

This is not true with bonds.

By: guinness416

guinness416 — Fri, 24 Aug 2007 17:12:20 +0000

Whoa, great posts JLP and Dylan!

By: Ryan

Ryan — Fri, 24 Aug 2007 16:39:48 +0000

Fantastic. I’ve really enjoyed the last few posts. Even the baggy pants one.

It is too bad that the “debate” at thesimpledollar didn’t seem too productive, but I think a lot of people appreciated the work you put in.

Thanks.

By: FIRE Finance

FIRE Finance — Fri, 24 Aug 2007 16:28:57 +0000

Nice work Dylan. We really like muddleheads’s simple advice. That is in fact the essence of what we all are trying to achieve:). The Journal of Financial Planning conducted another great simulation to form some National Savings Rate Guidelines for individuals. According to the authors, these savings rates have a 90 percent chance of success. Altogether the authors ran more than 72 million simulations to ensure a high probability of success with these savings rates. They performed Monte Carlo simulations, running each combination of age, income level and savings rate through 2,000 market scenarios. The details are here: http://firefinance.blogspot.com/2007/08/secure-retirement-at-what-rate-should.html

By: muddlehead

muddlehead — Fri, 24 Aug 2007 03:50:26 +0000

just not that complicated. 3 components to invest in during a lifetime. buy a home as soon as you can. sock away as much as you can as early as you can into any total stock market no load index fund. when you reach double nickles (55) and retirement looms, start fixed incoming with cd’s.

By: Cindy

Cindy — Fri, 24 Aug 2007 01:24:01 +0000

Dylan, that is fascinating! Maybe nickel or JLP can have to do a guest post to go into more detail. =)

I’m really glad that the longer you hold your investments with DCA, the less risky they are. Certainly makes volatility look more like blips when they occur.