Author Topic: Crystal balls vs bag lunches  (Read 1928 times)

Adventine

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Crystal balls vs bag lunches
« on: September 14, 2012, 06:45:37 PM »
A short but interesting read: http://www.reuters.com/article/2012/09/13/column-investing-saft-idUSL1E8KD9O020120913

Here's an excerpt:

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Few advisers want to say it, and no client wants to hear it, but your best bet isn't obsessing over funds and strategies but simply raising your savings rate.

The investment industry - and clients - are intensely focused on how to maximize returns, with much ink, brain power and tears spent on trying to divine which fund to choose and what strategy to adopt.

While this is entirely appropriate, and sometimes even fruitful, it is also, in many ways, a self-defeating diversion.

The truth is that the primary generator of wealth is earnings, and the only earnings that really count are those you don't spend but invest.

It's an obvious principle for a Mustachian, but not so for a Regular Person. That's why I always like seeing articles like this in the mainstream media.
« Last Edit: September 14, 2012, 06:48:52 PM by Adventine »

Kriegsspiel

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Re: Crystal balls vs bag lunches
« Reply #1 on: September 14, 2012, 07:08:03 PM »
Mmm, I think to a point, your investment strategy is important, and beyond that, it's all about the savings rate.  For instance, if you invest 100% in stocks, then your savings could get destroyed, even though you are consistently saving half your income.  The more and more I look into it, I'm more inclined to just adopt a Permanent Portfolio strategy and stick with that, at least I stand the best chance of not LOSING money, therefore letting the savings rate really do work.


Adventine

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Re: Crystal balls vs bag lunches
« Reply #2 on: September 14, 2012, 08:38:38 PM »
Kriegsspiel, that is actually kind of what the researchers discovered as well:

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"Putting fund performance front and center in terms of the plan sponsor's priorities is an error with far-reaching implications. That is not to say that fund performance does not matter, but our analysis suggests it is a much less powerful variable compared with asset allocation and, most of all, higher deferral rates"

After a quick Google search, yes, the Permanent Portfolio strategy seems mighty tempting. I haven't quite decided on my ideal asset allocation, myself.