Posted on 12/17/2006 6:58:30 PM PST by goldstategop
Allocating assets: Your portfolio should be weighted more toward bonds and less toward stocks as you get older. One rule of thumb: Subtract your age from 100 and put that percentage in stocks. For a 60-year-old, that would be 40% in stocks and 60% in bonds. With people living longer, some advisors say this formula is too conservative. Review your situation, perhaps with an advisor, to determine the right mix.
(Excerpt) Read more at latimes.com ...
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
they must have been saying that since the run of the tulips in 1800's++
RISK AND OPPORTUNITY COST OF CAPITAL
History of the Stock Market
Trading and speculating for value is as old as civilized mankind. In the third millenium B.C., history records speculation on grain harvests in Mesopotamia. Homer tells of the speculation of Trojans in buying wine for sale to soldiers, and the Greek philosopher Thales is rumored to have cornered the market on olive presses. The Romans formed stock companies to bid on Imperial contracts, and sold shares, called partes, to the public to raise capital.
In the Middle Ages, at the time of the Crusades, voyages from Spain to the Middle East were financed and speculated on by investors who occasionally earned profits as high as 1000%. The commercial revolution of the 16th through the 18th centuries, which gave rise to the merchant class, also stimulated interest in company formation, tradable ownership , and the concept of market value and accumulated paper wealth.
In 1635, when worldwide speculation in tulip bulbs panicked the markets everywhere, New York Governor Peter Styvestant was building a 1340 foot wall to prevent goats and hogs from straying into the lower east side of New York. This street and its coffee houses was destined to to be the meeting place of speculators, marine interests and, even pirates fencing their ill-gotten wares, and was known in its early days as the "street with the wall".
Wall Street rapidly become the center of trade of tobacco, wheat and, to a limited extent, securities and, in the late seventeen hundreds, its markets drew the attention of Alexander Hamilton as a means of refunding the Revolutionary War debt. He used the growing market there to give new liquidity to the obligations of the new Government to pay its bills, as a means of stimulating new private ventures.
By 1792, trading was formalized in a small room at No. 22 Wall St. When this small room could no longer accommodate the large group of investors interested in trading these Government Treasury Certificates, the meeting place was moved to a spot outdoors, near 68 Wall St. next to a buttonwood tree, that today evokes the name of an agreement signed by brokers to establish the New York Stock Exchange: the Buttonwood Agreement.
With vast immigration to the new country, and a burgeoning need for new industry, there were 295 publicly traded companies in the United States by 1800. These were financed chiefly on the New York Stock exchange and in the other smaller exchanges which grew up around it on Wall St. at that time.
The socio-economic function of the major exchanges, then and now, was to provide a place where buyers and sellers of business interests could meet, value, and trade their interests. The financial health of the growing country was dependent on its ability to find the means to finance new and speculative ventures by offering new opportunity in trade for opportunities which had served the past.
There were several corollary exchanges as well, with one exchange, which did business with speculators and investors "at the curbstone" on Wall St., arriving in their ornate horse drawn carriages. This exchange came to be known as the "Curb Exchange, and is now known as the American Stock Exchange. This exchange now incorporates the latest contribution to market liquidity, the NASDAQ computer-based securities market.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
I tell everyone to follow this simple rule: do not put more than 3% of your net worth in any one security.
Of course, you should diversify asset classes as well.
I recommend preferred stocks subject to the 15% tax rate instead of bonds, provided they are not callable for a long time or are selling below the call price.
Peter Lynch [blessed be his name. When it is pronounced, stand up and bare your head] used to express extremely strong doubts about bond investing.
"...sometimes tragic." Most of the time, people are getting better returns than pension funds and social security.
Everyone wakes up in the morning and goes to work to increase the value of your stock.
Bonds, in comparison, have no real upside.
Each February, the plan administrator came to the company to talk to people about their plans. In February of 2005, right after Bush talked about Social Security reform in the SOTU, and even though every employee but 2 said they were voting for Bush, only 1 person came to listen to the 401k guy.
Me.
And he wasn't even my agent. I had my money directed elsewhere under a previous agreeement.
That's an awful lot in bonds.
If you are stupid, put everything in Google stock even if you are 60 years old and plan to retire in five years. Just don't complain if you lose money.
Well, Peter Lynch, blessed be his name, doubted that the bond fund types have a reason for their existence. Bond upside is there, and is called interest rates lowering. 30 years treasuries issued in '81-'82 appreciated beautifully, as the rates came down.
Get a diversified financial portfolio! 'Nuff said.
Are lotto tickets part of a diversified financial portfolio?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Anything that stratifies people on the basis of ability will forbidden in the new society. Professional sports will be the only exception.
What the LA Times is inferring here is that the government needs to take over people's retirement accounts, or at least mandate that companies pay for, and take responsibility for, qualified financial advisors. People are simply too stupid and greedy to manage their own affairs.
save
Bonds have a considerable upside. My father put all bonds back in the seventies when yields went thru the ceiling. THen he watched the yields fall and he got rich. The market languished for ten years but he made a fortune. Then he put it all in utilities. He stayed rich.
The bad part of bonds is the puny yield and when rates start rising, the value of the bonds starts falling. I hate that.
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