"I spend about half of my time wondering why I have so much in stocks, and about half wondering why I have so little.” John Bogle

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The Importance of Luck in Your Financial Future
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My wife and I were hosting a group of similarly aged retired friends recently. As we talked about politics, travel, family and friends I realized how lucky we all are and were. Things could have been so different.

Most investors don’t realize that from 1975 to 1999 the S&P 500 compounded at more than 17% and the Fama/French Small Cap Value Index compounded at more than 22%. If you are not familiar with the Fine Tuning Your Asset Allocation Tables for these two indexes I suggest you review Table G-1b.

What’s the best time to retire? The answer is easy.

From 1975 through 1999 the S&P 500 had 3 losing years with an average loss of 5.1%. The largest of the 3 losing years was 1977, a loss of 7.2%. The Small Cap Value Index made even more but, as is normally the case, at higher risk. The 3 losing years averaged 12.4%, with the largest loss of 24% in 1990. During the period the S&P had 6 years it made more than 30% and Small Cap Value had 9 years it made more than 30%.

I was very lucky to be born in 1943 so that during the 1975 through 1999 period I was in my 30s and saving money for my eventual retirement at age 70. It was also during those years, starting in 1983, that we built our investment advisory firm.

What about those that started in 2000? Over the last almost 24 years the S&P 500 has had 6 losing years averaging 17.1% and the Small Cap Value Index had 7 losing years averaging 13%.

Not only were the bad years worse, but the good years were much more normal. The S&P had 2 profitable years over 30% and the Small Cap Value Index had 5.

There are likely millions of investors my age who think they are savvy investors, when they, like me, were just very lucky. Of course we could have been luckier if our first 24 years had been the bad period and the last the 25 the great period.

There are a lot more lessons to be learned from Table G-1b but I’ll address those in a future blog..

Latest Podcast- Leveraging ETFs, Moving from Cash to Equities, a Track Record You Can't Trust and more Q&A

1. My husband and I are moving to Fidelity to set up your Ultimate Buy and Hold Portfolio. How do we make the change from our holdings to your portfolio? Do I have to sell all of my holdings? Plus we want to find an hourly advisor to help. Can you make a recommendation? 1:45

2. I have $1million in a money market fund. Do you think it is time to start reducing the cash position and moving to short term bonds or equity ETFS? 8:45

3. Are target date funds the same as all in one funds? 17:15

4. I would like your guidance on the decision to put together a S&P 500 and Small Cap portfolio using 3 to 1 leveraged fu?nds. Does the extra return justify the higher risk? 20:00

5. How should I protect my portfolio against inflation from the loss of the petrodollar? 35:00

6. From what I can see you have not addressed investment needs of older people in their 80s and 90s. How should I invest? I just can’t afford to lose money at my age. 39:17

7. Would I be dumb to have 10% of my retirement funds in gold? 46:20

8. With the fed getting ready to lower interest rates should I move my money market funds into 10 year Treasuries? 52:40

9. In the small cap blend and small cap value indexes it seems investors don’t get the advantage of owning small companies that grow to be the giants of corporate America. How do you get the premium when you have to sell the companies when they move beyond their index? 59:15

10. What is the difference between your 2 Funds for Life strategy and the two fund strategy that holds the S&P 500 and small cap value? 1:01

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Leveraging ETFs, Moving from Cash to Equities, a Track Record You Can't Trust and more Q&A

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In This EditionThe Importance of Luck in Your Financial FutureLatest PodcastTestimonial

In This Edition
The Importance of Luck in Your Financial Future
Latest Podcast
Testimonial