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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75785  
Subject: Re: Is my wife smarter than me? Date: 8/26/2006 3:53 PM
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Thanks VTJon

I was thinking of putting 200K of the lump sum in fixed assets (bonds and money market) for 4 years...withdrawing 50K/yr and managing the 500K in small cap value stocks.I figured 4 years is enough time to ride out stock market bumps. I did the calculation and I think I came up with a 14% return averaged over 4 yrs would beat a 5K/mo pension check. I read Kiplinger's and all the time and they feature investors who have over the period of 4 years averaged returns of greater than 60%...



One of the issues is everything looks so simplistic in theory. I will do this, I will do that, and this should get me there. The reality is sooo different. The volatility of small caps and mid caps is a lot more of a roller-coaster ride than you think. Fall behind on your intended goal, and you start taking riskier moves to catch up. Another poster made a helpful suggestion...paper trade for the next four years, and see how you do. By the way, paper trading may not give you a full impact of the emotions involved when real money is involved.

In addition, you are discounting the adjustment-for-inflation a little too casually in these scenarios. That small amount will add up to a significant number over the long term. I think your wife's suggestion is the smarter option, but good luck to you.


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