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0 pointssokoloff4y ago0 comments

In the overall distribution of risk-aversion, bogleheads are more comfortable with risk than far too many savers. I’ve seen too many of my parents’ generation squander decades of investment returns because of the idea that stocks are risky.

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lodonnell92134y ago

Not just parents generation, our generation. I don’t play the stock market, I’m not skilled enough for it, but I do have a stocks/share ISA, but I’m also not against spending money to make it. Many people I know will happily continue to pay interest on an item, but have savings which is less than the interest on credit. They have a 20% credit card vs a 0.5% interest savings.

And little things like that can help in the long run.

paulpauper4y ago

You don't have to be skilled. Just simple indexing will beat most of thepros anyway. Most active managers lag the market anyway.

andrepd4y ago

Buying a mutual fund is precisely not "playing the stock market"

Spivak4y ago

I mean once you reach a certain age you really can’t afford to just hold on to your investments for a few decades because of a financial downturn. That retirement money is also most people’s emergency medical fund which can and does hit people in their 40s.

sokoloffOP4y ago

I’m not saying to put 100% of every liquid dollar you have into the market, but in your 40s, I think it should be the majority of your investment funds.

Boglehead advice agrees, with an explicit principle of “Never bear too much or too little risk”, suggesting 30-40% bonds in your 40s and the rest in stocks.

I think more people underperform from being too risk-averse than under-perform from having too much equity exposure and having an unfortunate overlap of a large expense and a downturn in the market.

spekcular4y ago

The book "Lifecycle Investing," by Yale professors Nalebuff and Ayres, argues that a young person ought to invest 100% or even more (via leverage) in stocks. (More specifically, a young person with high future earning potential, which probably includes many people here with a career in tech.)

I'm fairly risk averse and don't totally believe their leverage calculations. But it did convince me that any non-negligible bond allocation is probably suboptimal.

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