Personal Investments • Is 10% in speculations OK if you don’t need the money?

ETA - 45 years old and total retirement investments are roughly 400k currently. I predict that I’ll want around 50k a year at retirement and want to retire around 55 years old.

I didn't try to crunch the numbers but if you want to retire at 55 you REALLY need the money.

Is 10% in speculations OK if you don’t need the money?

If you do this then you need to have realistic expectations.

A mutual fund manager would be in the investing hall of fame if they could beat a comparable index fund by 1% over the long term. With a $40k portfolio that would be an extra $400 a year.

If you want to be wildly optimistic then assume that you might be able to beat a comparable index fund by 10% which would be doing fantastic.

Thinking that you will find stocks which will go up 10x is not realistic.

You also need to be realistic about how much time it will take to study stocks to select stocks to buy and then to monitor those companies and their competitors, after you buy them. Thinking that you will be able to pick superior stocks without a lot of work is not realistic. You will also need to monitor them pretty much daily to see if is any important news. Decades ago when I dabbled with individual stocks I vaguely recall it being said that you would need to look at 20+ stocks to find one which was worth buying. If you want to buy five stocks then you would need to look at 100+ companies and if you spend a couple of hours learning about each company to rule them in or out that is a lot of hours. It can vary but to do it right might require at least an hour a day, call it 400 hours a year to make it a round number.

The problem is that if you put $40K into a play account and to fantastic and beat the indexed by 10% that would give you an extra $4,000 a year before taxes. The problem is that you may have spent 400 hours picking the stocks then that is only $10 an hour and there is no guarantee that you will even get that. You could likely make more flipping burgers than stock picking even if things go very well.

With any sort of realistic expectations it is real hard to justify a 10% play money account.

Statistics: Posted by Watty — Wed Dec 04, 2024 9:46 am — Replies 42 — Views 1338

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