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Author: CultClassic One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41614  
Subject: OT - My Dad and His Money Date: 12/13/2005 7:42 AM
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I was home visiting my dad a few weeks ago. He is within a couple of years of retirement. For the first time we had a discussion about his assets and retirement savings. He was typically very tight-lipped about his savings, so I really didn't know how much he had or what he had done with it. He had mentioned his investment in at least one stock mutual fund throughout the years so I had certain assumptions about how he had invested. Nonetheless, knowing that I had been studying and developing my own investment strategy, he now was asking me for some help constructing his portfolio.

We started developing a strategy to put some in stocks spread across large, mid, and small caps, some in bonds, and a small percentage in foreign stocks and REITS. However, when it came time to divvy up the actual funds, there was only a few thousand dollars in his stock account.

I will tell you that my dad was born during WWII and his elders who had advised him were children of the depression and thus deathly afraid of the stock market. How the reality of this fear came crashing on me when I then found out that over 95% of his assets were in a single ultra conservative bond index fund. He had been plowing money into this since the early 70's, missing out entirely on the largest sustained bull market of the century!!

I said “Dad, are you kidding me?” He replied “Do you know how many people have lost money in the stock market? I wasn't going to risk our retirement money.” I remember as a kid listening to my mom and dad argue about money. But my mom had stopped arguing years ago. Their spending habits weren't that different. Now I know what the argument was about.

I realize that it's his money and he is the one who has to sleep at night. At least he had the discipline to consistently save. But I just feel like banging my head against the wall as I ponder whether what he has saved is enough to last for another 30 years if needed.

The situation has made me think about the emotions that rule one's financial decisions. It's as though you have to steer the course between unrealistic, exuberant optimism and the paralyzing fear of failure. I guess my dad just got siderailed. Anyhow, I hope I'm not patronizing him (or anyone else). He is a better man than I am in most ways.

Sorry for the long lament but I thought this story might help someone broach the subject of money with a significant other. Fwiw, my advice is don't assume and don't wait too long.

sv
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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10588 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 9:57 AM
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Howdy sv,

Don't be too hard on your Dad, or so sure of what others should do / should have done. Someone may someday return the favor <knowing lupine wink>.

Do you know anyone who has listened to "sound investment advice" and lost more than a few pennies? Or lost thier whole life savings <shudder>? I'll bet your Dad knows such people.

And ya know what, even this den dweller does. And I don't have to go back to when the markets were essentially down and flat for 17 years in a row to find them. You do know that happens to markets, and not so very long ago, don't you?

Who actually knows which way things will go? There are some awesomely wonderful threads around right now about how the US economy and its stock market is poised to crash and only going overwieght investing in things like gold and silver (and certain commodities) are likely to save one! We can find "sound investment advice" for any and every potential approach, so which one to choose <a wolf trying to look thoughtful - glasses halfway down snout ... reading jacket on in library, etc. etc.>.

How many people profited vs lost money in the high tech market bubble of the recent past? Or were all winners <g>?

I know folks who worked their whole careers for AT&T and there was no way that widow and orphan's outfit was ever going to run into trouble ... It was SAFE to have even over 50% (all?) of all your retirement assets in it - at least according to SOME <smile>. They were right for far more years than they were wrong, but when it went south ... More recently I know folks who worked for Gateway and became quite wealthy on paper. And unfortunately some of them acted wealthy before realizing the profits <sigh>. The bounceback was always just around the corner for a company as great as Gateway. I suspect none of US knows of anyone who ever lost significant sums in companies like Enron, or any of those others slammed by fraud etc.? Heck, I know a very responsible conservative (and highly paid and respected CFO) who has lost more than half of his family's savings in the stock market ... Hint - does increased risk mean increased returns? duh. But he does have maybe half of his earning career still ahead of him, so no problem ... just increase the risk meter a bit more ... <sigh>.

Yea yea, they should have diversified (or not). They should have done more studying about investing in general and specifically for their own futures. Maybe they shouldn't have trusted the promised pensions from corporations that employed them? etc. etc.

There are probably people amongst most all of us who were over weighted in one or more stocks at the wrong time, or without enough dispassionate DD, or without enough understanding of the actual risks and their own risk tolerances, etc. Of course none of us ever were <smirk>. We are diverse critters in so many ways, and that is part and parcel of our strength. So what's wrong with some folks being uber conservatives in terms of investment risk? Shouldn't we celebrate not only diversity as an overall concept, but each part of it too?

We all know that everyone should obey posted speed limits, not only for our own safety but out of consideration for others, right? We should all have our brakes checked every 6 months or so, right? We should all have a complete health checkup every year or so, right? (let's not even talk about colonoscopy, right <g>?) We should all eat a balanced diet, get enough exercise and manage the stresses in our lives, because what is more important than our own health, right? If we believe in a God, we should be regularly going to church and following that religions precepts, right? etc. etc. ... Do we all do all we "should" all the time or is it only 4 legged fur bearers who don't always do what they should?

Bottomline is that not all folks have the inclination or time or resources or even risk tolerance to invest in equities. And if they are missing on any of those things, then is best investment for them still stocks?

Take care & Happy HollyDaze,
IcyWolf



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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10591 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 1:09 PM
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Icy, your post is enough to make me want to liquidate all investments and throw it directly into ING account. Very depressing.

The problem is, if I do that, or use bonds or some other such conservative vehicle like the OP - can't I pretty much garentee myself not to have enough to live on in retirement? I worry about how we will sustain ourselves thru 30 years of "retirement". What if I need to help my parents out? What if I need to help my kids out? How will I pay for my house, college, a car every 10 years or so, - nothing extravagent - but the "L" in Living. If the stock market doesn't help me, I don't know what can.

-Noodle (looking for big rock to crawl under)

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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10596 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 2:07 PM
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Hi Noods ...

Now now, don't go trying to crawl under that big rock over yonder ... well, not quite yet anyways <g>.

I'm not sure why I got ya depressed, but try a nice french merlot ... that may be the best med for such a state of mind <g>. Really though, my post was simply trying to point out that while stocks are an important part of the PORTS we run (otherwise why would we be here chatting in TMF <g>), it doesn't mean that stocks are the best investment vehicle for one and all. Or even an important part of their PORTs.

Any investment overview, or retirement planning, seems to require we have definable goals and then look at what it will take us as individuals to get there - Including what risks are reasonable for the person involved.

I have an in-law who is so risk averse she makes me look like the penultimate riverboat gambling wolf. She invests ONLY in treasury instruments. She has a modest but comfortable lifestyle for her and her family and a fairly substantial salary. So she is putting a considerable amount annually into her T collection. Assuming disaster doesn't strike, her T collection will be more than enough for her retirement and family obligations. And so for her perspectives and lifestyle and retirement goals etc. ... she doesn't want the risk or to devote the time, resources etc. that stocks entail. More power to her!

But I also have friends through TMF that are invested pretty much 100% in stocks. My own plans and investments do involve stocks, as I think most folk's should, but I structure things so that no single stock should cost me more than 1% of equity investing pool, which is roughly 15% of my investable assets. I would be too uncomfortable if stocks were over 25% of my investable assets. I become too uncomfortable if any single stock position of mine becomes much more than 10% in the red ... etc. etc ... and I have even more eccentricities (financial and otherwise). But thats just me ... And you're YOU (which is a good thing otherwise I wonder who I would be corresponding with <smile>). Shouldn't such personal nuances extend into our investing philosophies?

Some folks I know take on risks in the stock market without knowing the risks or even what they find acceptable. Ever have a friend who claimed to enjoy the thrill (risk) of the stock market, but only while they were winning <smile>? I think most folks who start investing in stocks don't know what level of risk they are comfortable with until after they start to have to endure some losses? And until we know that about ourselves .. well ... there might be some sleepless nights in ye old den. And personally, I have too many good reasons to have sleepless nights, I just don't think stock investing should be one of em.

I do think most of us hereabouts, yourself in particular, appear more than capable of taking on calculated risks within equity investing in order to increase the odds of achieving defined goals. Further, I suspect most can do so without feeling any significant anxiety etc. Congrats and good luck to all such souls! And just because some of have different goals, different bases from which we are starting, different views of risk and levels of acceptable risks, etc., is it so surprising that we might have differences in how/IF we invest in equities and to what degree we do?

So don't go trying to slip under yonder stone ... at least not on my account. I am NOT advocating getting out of stocks. Rather to know thyself AND the risks inherent in equity investing, then tailor what fits best for YOU. I really do hope everyone I know has investing returns to allow them to do all they want to do, but sadly the reality will probably prove otherwise ... and thats what the hard liquors are for <wink>.

Take care & Happy HollyDaze,
IcyWolf




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Author: auctionnoodle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10600 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 2:33 PM
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Icy, I rec'd your post because I agree with everything you said. In your previous post, you started listing several examples of what can go wrong in the market and it was scary. I know all that, of course, but I don't like to have it pointed out too often - especially not right before I am trying to buy a house, lol.

I think my money is fine where it is (stocks, bonds, cash, mutual funds, here and abroad), otherwise, I would change it, right? <grin>

It's probably the cold weather that makes me want to hole up for the winter. I bet it much warmer in your den :)

-noodle

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Author: CultClassic One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10604 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 4:51 PM
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Wolf,

Good points. Here are some other thoughts.

I don't equate investing in a stock index fund with some of the riskier behavior that you mention in your earlier post. I think that putting all your eggs in Gateway or Enron or the tech sector or even ATT is more akin to veering toward unrealistic, exuberant optimism even if people don't always recognize it.

I marvel at how the depression still drives investment behavior for so many people. I'm relatively young and so it might as well be ancient history to me but obviously its lingering effects on the psyche may take many generations to work through. Obviously, I didn't lose big enough on the great tech bubble to scare me away from equities.

As a society we may be past the golden age of the three-legged retirement - pension, SS, and personal savings. My father has no pension so his retirement is dependent entirely on SS and personal savings. Today, we have airlines declaring bankruptcy and dumping their pensions on the PBGC. Surely no one with a GM pension can feel that great about it right now. And this board has quite a lot written about the unsustainable rise in federal entitlement spending. My point is that investing in stocks is practically a necessity to ensure a smooth retirement in this environment unless you happen to be exceptionally frugal relative to your earnings.

Finally, I'm sure that I'll get my come-uppance someday when my son rolls his eyes at me and says "Are you kidding, Dad?"

sv

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Author: RaptorD Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10615 of 41614
Subject: Re: OT - My Dad and His Money Date: 12/13/2005 10:09 PM
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Dear Furry,

Your posts scared the pants off me too, but not regarding investing, nosiree, I love investing, and to lose a little once in awhile to go for the brass ring bothers me not one iota (there's that diversity again.)

No, the nightmares you will bring to me are due to your use of the "c" word. You must not have a beautiful female internest as I (so very foolishly) do.

"(let's not even talk about colonoscopy, right <g>?)"--Mr. Cold-hearted Wolf

Oh, I could tell you a story about being paralyzed due to wrong drugs, hearing every sound and voice in the hospital room, not being able to talk to tell them all something was way, way wrong, feeling every single turn and curve of my . . . Nah, it's just too scarey for the little ones about--or the males among us.

And a merry Checkup Season to you to Icy,

Dan
She's beautiful, but a sadistic bit . . . er, doctor

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