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I was talking with an old friend who is roughly 50 years old. He said he's putting everything in AMZN. I asked why not just put everything into QQQ (Nasdaq 100 ETF) and forget about it. He said he only believes in certain tech companies, and AMZN is the best.

I remember speaking with him in 1999. He was trading stocks and his percentage return was something like 20% and the market did better. I asked why he doesn't just buy and hold the indexes instead of trading. I don't think he had a real answer for that. I do remember that he believed that everything about Cisco was great and said that instead of birthday and wedding gifts, he'd really want people to give him shares of CSCO.

Today, CSCO trades at about the same price it did twenty years ago in October 1999, and half of what it sold for at the top a few months later. QQQ, though, has more than quadrupled.

My friend believed in real estate during the early 2000s bubble, too. My friend's ability to be completely wrong by following the crowd is a triumph of hope over experience. I don't know what Amazon's future holds, but I know that I don't want to have all of my retirement in any single stock. I find it comforting to know that, while individual stocks go to zero, the indexes go up over time. The most important thing I'm looking for in retirement is peace of mind, not riches.

He's also working in Silicon Valley. He left a safe company for one that paid him more, but now that company is in the news and laid him off. Home prices there are falling and his stay-at-home wife wouldn't let him move the kids, anyway. He says the prospects of getting another high-level job in Silicon Valley isn't good right now. To boot, a prior employer is now coming after him, claiming they overpaid him and they want their money back.

My wife's 65 yo Uncle Harry is in the hospital right now. He's dealing with serious surgery that could possibly (unlikely) put him in a wheelchair, but his biggest concern is that his wife just lost her job and "we're going to lose everything." He bought a big, nice house that they didn't need - my wife believes it was to one-up my FIL. He's a car guy and cycled through fancy $60,000 - $100,000 cars every 18 months.

"What about Harry's disability policy?" I asked my FIL. Uncle Harry had wisely purchased a disability policy that paid him $60,000 a year for the rest of his life. When his employer closed the plant, he suddenly became disabled and began collecting $5,000 a month, and it funded much of Harry's retirement lifestyle. My FIL shook his head. "He sold it to pay off debt." Uncle Harry is, indeed, facing losing everything. Unless his wife is going to continue working and can find a comparable job, they'll have nothing but social security to live on in the future.

That's my nightmare.

As the decades roll by, I'm seeing the benefits of living within your means and diversified investing. It's not so much how well I'm doing; it's how others are reaching a day of reckoning. I think it was Warren Buffett who said that only in low tide do you see who is swimming naked. So many people are swimming naked.
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