![]() ![]() ![]() Aside from inherited wealth, those parts are our real estate as well as the net present value of future earnings, savings and social security. Recognising those other parts of our total financial portfolio (TFP) can be quite a happy surprise, and they can be an important or even dominant factor in how we go about structuring our securities investments. So, what does this mean for the typical wealthy investor? The first step is to recognise that a securities portfolio is only part - even if it can be quite a large part - of what we should consider when making long-term decisions about investing. In the long run, the consequences are substantial. The well-known differences in rates of return - particularly after adjusting for inflation - between stocks and bonds compound relentlessly over time. ![]() That is also why asset-mix policy is so powerfully important for long-term success in investing. (He said: “Give me a lever long enough and I can move the world.”) ![]() That - the period between now and when assets will be converted into spending - is the Archimedes lever of investing. This is to wrongly define the problem to be solved, and to ignore the value of the long-term investor’s greatest asset - time. So the small trust could have been much more adventurously invested. He had given no thought to the reality that the child would also be a beneficiary of other, quite enormous, trusts. When I was working for one of the world’s wealthiest families, I asked the manager of a small trust for a young child why it was conservatively invested, with 40 per cent in ultra-safe bonds and 40 per cent in utility stocks. And so their portfolios are more “conservative”, and more heavily invested in bonds, than is optimal. When accumulating and investing in assets to assure retirement security many decades hence, or to pass on to the next generation, people worry far too much about price fluctuations in the near future. And the long-term result of this self-inflicted blunder can do serious financial harm to wealth, particularly later in life. Their “framing” is not right, giving them little chance of choosing an appropriate strategy. Hopefully, they are small, little harm is done, and we can recognise our mistakes and learn how to do better - much better.īut one mistake is made by almost all investors almost all the time - and, because it is not recognised, they make it over and over again: taking decisions on securities in the wrong context, leading to an over-reliance on bonds. We look forward to receiving your feedback.We all make mistakes in investing, even the wealthy. We hope you enjoy learning about how to successfully manage your money and resources. The national Financial Security for All team works collaboratively to provide consumers a source of reliable and up-to-date financial and consumer information through a knowledge base of commonly asked questions that have science-based, peer reviewed answers.Ī variety of learning lessons have been developed to create self-paced learning opportunities that youth and adults can use to further enhance their knowledge in particular areas. Members develop resources on personal finance provide peer-reviewed Frequently Asked Questions and other featured resources and answer Ask an Expert questions.įinancial security, the ability to meet day-to-day expenses while saving and investing for tomorrow, is a lifelong goal for most individuals and families. The Financial Security for All Community of Practice, a virtual community led by twelve Extension professionals from across the country, has over 300 members from Land Grant Universities in 44 states and one territory. ![]()
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