The Impact of Saving Versus Return on Wealth
This week’s AAII Weekly Digest highlights these
“must-read” AAII articles:
The dramatic impact on wealth from compound returns really starts to pick up after an investing period of 20 to 25 years. Older investors should place a bigger emphasis on saving more than on building aggressive portfolios with higher risks of large losses in a given year. Lower savings rates require higher returns to achieve the same ending wealth, but those higher returns may not be feasible or realistic.
The quantitative method considers not only the target allocation but also the prevailing valuation of stocks and the relative valuation of bonds.
Concentrated investing is investing in such a way that one is not relying on diversification to keep the effect of individual errors in one’s portfolio remaining tolerably small. As such, investing in a small number of stocks requires a focus on margin of safety and valuations as well as the ability to invest for the long term.
Whether you are planning for a major purchase, financing an education or planning for retirement, an analysis structure that explicitly considers investment returns, cash flows and horizon is crucial to your eventual success. This article outlines step-by-step procedures for evaluating pension investments and future investment goals.
Our Member Question for this week is:
How worried are you about running out of money in retirement?
Vote to answer this week’s Special Question: What steps would you take if you thought you were going to outlive your retirement savings?
Last Week’s Results:
Poll results are as of 9 a.m. (Central) on Monday. 2,021 respondents.
As investors, we have all made mistakes. Last week’s survey asked our readers what they thought was the biggest mistake an investor could make. We then followed up to ask about the biggest investment mistakes our readers have made.
“Easier said than done” is a common saying that applies well to developing an overall strategy for your investment portfolio. The basic concepts are relatively easy, but they become more complex and less clear-cut when it comes to applying them to real-world situations. This e-book, available exclusively to AAII members, is designed to bridge the gap between theory and practice.