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Author: sasaba Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19380  
Subject: long term Date: 12/30/1999 6:02 PM
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I am 63 yrs. old & have within the last couple of years started reading & asking questions about investing. Prior to this I have had money in 401K's & annuities.I cannot come to a reasonable conclusion regarding the advantages of investing for the "long term" which is recommended in every thing I read. I mean when your my age, how "long term" are we talking about? I can't for the life of me put a numerical value on the expression "long term". Does this vary from product to product & individual to individual? Is there some "magic" number that can plug into all instances? My goal is not to leave my heirs as much as possible but to have enough to be comfortable for my duration. If in striving to accomplish "long term" results, we eliminate our own enjoyment of the fruits of our labors, what have we accomplished? Any light shed on this issue will be appreciated.
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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1216 of 19380
Subject: Re: long term Date: 12/30/1999 6:06 PM
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Well, at age 63 you probably have a good 25 left in you; that seems long-term to me. On a more serious note, most of the time it is my impression that the term "long term" is used in two contexts:

1. When dispensing advice to some one who is 25 or 30, the long term means letting the passage of time work for you in the compounding of value.

2. Otherwise, long term usually means over one year in the context of buying stocks holding them at least a year so that upon sale it is treated as a capital gain and not ordinary income.

Hope this helps.

TheBadger


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Author: sbarone Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1218 of 19380
Subject: Re: long term Date: 12/30/1999 6:33 PM
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Regarding your comment about not building an estate for your heirs, I would recommend a book that I found very useful. The title is "Die Broke" and I fogotten the author's name right now. It discusses various ways to build and enjoy your financials. The second half of the book discusses all the various kinds of financial instruments, insurance, and assistance that is out there, which I also found very useful.


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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1219 of 19380
Subject: Re: long term Date: 12/30/1999 8:28 PM
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for sasaba:

All of us face the dilemma of managing our retirement money: spend too fast, and you'll have an impoverished advanced old age; spend too slowly and you'll unduly enrich your deserving and undeserving heirs, where the underserving include IRS. The book "Die Broke" is by Stephen Pollan and Mark Levine; I agree that it is worth reading. The authors more or less advocate the policy of shifting your retirement money into annuities that expire when you do, so that you can indeed die broke. That approach doesn't appeal to me because all the annuities I've seen have such miserably low pay-outs. That makes sense from the point of view of the annuity sellers, of course, since they are in business to make money. Buying one of their products seems equivalent to making them your heir, and they don't deserve that consideration from you. My partial solution to this dilemma is to make a tax-free foundation the heir of my IRA, currently my largest single asset. The foundation can inherit my IRA without anyone paying income tax or inheritance tax. Meanwhile, I can pay myself an annuity out of the IRA and that payment can be inflation adjusted and grow with the market.

Regards,

Chips

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1220 of 19380
Subject: Re: long term Date: 12/30/1999 9:22 PM
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You are facing one of life's real issues. If we spend too much, we won't have it and won't have the prospect of getting more ever. If we don't spend it, we will miss out on a bunch of fun in life. There are no answers.

With regard to investments the defintion of long term generally means longer then a year and I dare say more commonly a period of years. I make investments which at the time I make then I expect to hold for five years. I figure if I have not looked into the company and its product so that I belive I would be happy keeping my money there for five years I need more work. I have sold things in time frames of 18 to 24 months when circumstances changes or when I was just plane wrong.

The impact of inflation over a period of years is great -- just as great as the impact of compounding. But there are two things I am aware of that it is very difficult to prepare for.

#1) is the falling meteor event. If you are in perfect health and suddenly an accident or freakish event happens you could become a handicaped individual with all your mental abilities unchanged.

#2 is the fact no one knows when the next period of stock market ups or downs will begin. It makes a great deal of difference to you if you have 5 years of flat or decreasing investment values during the first 5 years of a retirement -- and I am not talk just about the psycological view.

Regarding the second issue, there are methods of establishing a probability your investment will (or will not) last for a given period of years. You have to pick the # years and then decide how much money you want to take each year. These computer programs then say that in any given year there is a X% probability of stock market declines. Some of the more sophosticated programs even deal with the lengths of cycles.

Simple planing programs such as Quicken's Financial Planner don't. It is very easy mathmatically to say over the last 100 years the stock market has returned say 12% and just plug that number in. If you retire in 1928 or 1971 the returns don't look anything like 12% a year after 5 or 6 years of retirement.

The complex programs usually give results like there is a 95% change you won't run out of money. I have heard there is such a program in the T. Rowe Price site that has a charge of $500. There are some spread sheets that can be downloaded from a web site which I believe is called Retire Early. The sheets I have download deal with an allocation between stocks and bonds.

I believe I found the Retire Early information on a Motley Fool Board dealing with retirement planning. Hope some of this helps.

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Author: BluesH One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1276 of 19380
Subject: Re: long term Date: 1/3/2000 3:32 PM
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TwoCybers wrote:
I believe I found the Retire Early information on a Motley Fool Board dealing with retirement planning. Hope some of this helps.

You're referring to The Retire Early Home Page at
http://home.earthlink.net/~intercst/reindex.html

A great web site. There's also a TMF board dedicated to readers of the Retire Early Home Page. It's at http://boards.fool.com/Messages.asp?id=1380025000289001

Hope this helps!

Bob H, aka Blues


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