Good article, on how *NOT *to put all your money in stocks, just in case of anything. Forwarded from other mailing list.
Regards, DE ---------- Forwarded message ---------- From: citation502 <[EMAIL PROTECTED]> Date: Nov 15, 2007 10:36 AM Subject: [stockinvestorsforum] 10% rule for new investors To: [EMAIL PROTECTED] Really, I have two pieces of advice for younger investors. First, ignore the idiocy propagated by brokers that THE YOUNG can take more risk because they have a longer time horizon. That is just stupid for too many reasons to cite here. Among other things, if you had a choice whether to save all your life's savings between the ages of 28 and 33 OR between the ages of 54 and 59, it's a no brainer that you choose the former. The power of compound interest makes the 28-33 saver a multimillionaire by the time the 54-59 guy starts his savings program. AND if you are the 28-33 guy or gal, you will have so much money at age 50 with which to speculate, you will be able to speculate without touching principal; not so the late saver. AND the 28-33 person has so many contingencies still awaiting around the corner: loss of job, illness of a child, huge mortgage, children's college costs -- WHEREAS teh investor in her 50s already has a whole lot of that behind her when she starts speculating at age 55. *Besides, it should be apparent that if the source of such "advice" is a broker -- who has a natural conflict of interest with his or her clients -- then it must be wrong. * NOW, to my 10% rule for young investors: figure out how much you SAVE each month (retirement accounts and otherwise). Let's say it's $1500. Now multiply that sum by 10, i.e., $15,000. That is the maximum you should put into non-mutual fund individual stocks. IN THAT WAY, if your portfolio takes a 10% hit, your net worth is at breakeven. HINT: ASK some investors who were around in 2001 whether a 10% hit to a portfolio is possible. * * Remember, if your $100,000 portfolio goes DOWN 25%, you are at $75,000. If it then goes UP 25%, you are only at $93,750, i.e. still$6000 in the hole. *A dollar lost and a dollar gained are NOT equal.*
