And those formulas can be measured by the likelihood that they achieve success when used by someone else.
Can that even be estimated? Even the same person seeking to repeat a previously successful formula can be wiped out. The likelihood is that there are no reliable formulas at all They are all crapshoots in the end. Here's my advice in any case: Invest in what you know and don't be afraid to leave a nickel on the table.
I'm not saying the results will be uniform, I'm merely trying to explain the core fundamentals that make someone more likely to successfully invest.
Well, you can start a newsletter. People with an interest and aptitude for investing might subscribe, and you can make a little money on the side. Then there are those no-show invisble people -- the people who have no such interest or aptitude and who if forced to invest for themselves would end up as sitting ducks for somebody smarter. They'll reach retirement penniless in your world.
Personal finance is a pretty basic class. Learning how to balance a checkbook is as important of a skill as any for the general public.
Successfully balancing a checkbook will not make a successful investor of you. The local public school system here (Northern Virginia) offers a 36-week online course in
Economics and Personal Finance, but only as an elective. Like your newsletter, it pretty much draws from those who aren't likely to become the problem people to begin with.
If you want to make that argument, why require world religions or anthropology or statistics or sociology to get a degree in biochemistry?
It's a simple enough argument. Deserving of a straight answer rather than tangents.
You can't possibly screw it up, but the quality of retirement will likely be far less than if you didn't screw it up in the DJIA, or NASDAQ, or S&P500. And we are only talking about investing in indexes here, the most basic, simple, and least difficult to screw up type of investment out there.
How do you get people into index funds? How do you make sure they consistently contribute? How do you keep them from selling every time the index goes down? Or from cashing and spending it all if they get sick or lose a job?
Of course I have a choice in other ways of saving. But I do not have a choice in what form my SS money is saved.
That's the whole point. It's insurance. It's a floor. It's the level you can't do any worse than, no matter how badly everything else might go for you. The fact that 65% of seniors rely on SS for at least half their income ought to tell you how hard it is for most people to amass a whole lot more.
Another invalid attachment.
Not sure what's up with that. I think the "use within one hour" rule might have gotten the first one. I was back and forth packing up stuff for Goodwill this morning. I don't think an hour went by anywhere, but maybe it did.
In any case, it doesn't matter whose graph you use. That's essentially four years -- 10% of an average working lifetime -- in which there was zero gain, and if it were actualized, worse than that. Those goose-eggs will now demonstrate the "magic of compounding" in reverse over the rest of one's investment lifetime.
As you can see, it goes down for some periods of time, but it recovers and keeps going up.
So J.P. Morgan was right.
But someone who started working in 1970 and retired in 2010 and invested in some sort of stock based retirement has still seen enormous returns on their investments, despite any recent losses.
Someone who has not died since 1970 is still alive. It does no good to advise people what to do in 1970. People can only do things now, and as we all know, past performance is not a guaranty of future results.
So yes, there are ups and downs, but just because we are in a down doesn't mean that investment-based retirement needs to be completely thrown out.
Of course not, and I haven't suggested it. What I have suggested is that it is unwise to worship investment-based retirement vehicles to the exclusion of other vehicles and to force other people into a shoe that doesn't fit. Insurance is an important element in a diverse approach to achieving financial security. SS is insurance.
Okay I'm glad you cleared that up for me. But my biggest beef is the rate of return for the program is horrendous...
That depends who you are. An average worker with a wife and two children who retires at age 67 in 2030 will have earned a real rate of return of just under 4%. That's nothing to sneeze at. A high-income worker retiring under virtually the same circumstances could conceivably have a negative real rate of return. That's a rarity, but while high income people are apt to do fine as far as straight dollars go, they don't tend to get a great rate of return.
...and is worse for my generation then it is for current retirees.
The tax formulas haven't changed and the benefit formulas haven't changed. Where does "worse" come from?
I agree, but its another reason I don't like the mandate, because I'm afraid it'll kill any chance of this trend remodeling the healthcare industry.
PPACA deals with healthcare financing. The healthcare industry has been left to remodel itself in response to changing finanical incentives and penalties. There aren't many limits. And keep in mind that the alternative to PPACA was the equivalent of going over Niagagra Falls in a very flimsy barrel. Bad idea. This is better, but there is a long, long way to go.
The AMA has meanwhile been protecting the social and economic status of M.D.'s for decades by working to limit the number of uS medical schools and the numbers of new students they admit. Well into the 1990's, they were projecting doctor-gluts and taking steps to avoid the horror of such things. By 2000 or so, the looming doctor shortage had become so obvious that they had to change their tune. Officially, they now back what seem like laudable increases, but all programs toward those ends are behind schedule. And the next limiting factor has now become residency slots at teaching hospitals. There aren't enough of them. This is in part because federal funding of slots was capped in 1997 by the same budget bill that gave us the idiotic "Sustanable Growth Rate" and the annual "Doc Fix" problem. Can't really blame the AMA for that I suppose, but it's still the same problem. We really need to do a little angioplasty here. Part of it may be work-based in addition to school-based licensing as you suggest. Part of it may be taking some prelim and gatekeeper functions away from doctors and giving them to other trained professionals as I suggested earlier. I think PPACA will create pressure for more medical personnel at all levels, and that these things and others will have to come to pass at some point as the result.