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Cramer says bye-bye to bonds for retirement
Jim Cramer knows first hand that there is no such thing as a get-rich-quick scheme that can create sustainable long-term wealth; the most reliable way to make your money grow is to do so slowly and with prudence. But too much caution is also bad news.
That means that when it comes to retirement, you can't hide your money and cling to safety, just assuming you will have enough money when you retire. A little risk in stocks with higher returns will ensure that you retire wealthier.
That means that when it comes to retirement, you can't hide your money and cling to safety, just assuming you will have enough money when you retire. A little risk in stocks with higher returns will ensure that you retire wealthier.
Prudence
A penny saved is a penny earned.
Save a penny, have a penny. Work an hour to fix a broken pipe, that's one less hour you'll need to work to fix a broken pipe. Work two hours now, save yourself at least two hours later. See how that works?
Teach your children these life lessons and they should probably do okay in life.
Greed
A penny invested is a dollar earned.
If we assume a yield of 10% over the long-term and assume inflation will be 2% over the long-term like many pension funds once assumed, then there will be a real yield of 8% over the long-term.
For each penny we invest as a baby is born, we can safely assume that the baby will have $1.01 when it reaches 60 years of age. All that from simply assuming a little bit of stock market risk! Early retirement, baby. That's what I'm talking about.
$0.01 x 1.08^60 = $1.01
I therefore suggest that college is a complete waste of time. As responsible parents, simply invest $20,000 at birth and the child will have $2.02 million at age 60 for retirement purposes (in today's dollars). Wow! This will also relieve a lot of the burden and expense of a good education. College is not cheap! Just set the children up in front of video game consoles until then and let the them enjoy life doing what they want to do. $20,000 each and you're done! There's no reason to push them. Let the investment passively do its work.
This assumes that the initial assumptions about investment returns are valid. And why shouldn't they be? Although past performance is not necessarily indicative of future performance, that's 100+ years of exponential growth history we're talking about! What are the odds these assumptions ever fail? Exponential trend failures are very rare events! I haven't personally seen and documented more than a few hundred of them since starting my blog! Okay, maybe a thousand. I have no idea really. Who's counting?
What's the worst that could possibly happen? Other than ZIRP, a debt addiction, anemic civilian labor force growth, and struggling real estate construction, we're nothing at all like Japan! Oops. I didn't mean to mention Japan in the optimistic part of my post. Sorry about that. Why don't you just assume that it doesn't matter. Many do!
5 comments:
A little risk in stocks with higher returns will ensure that you retire wealthier.
If there is a little risk in stocks then retiring wealthier cannot be ensured.
That's just basic logic. The definition of ensure is to secure or guarantee, to make sure or certain, to make secure or safe, as from harm, or to insure.
"A little risk" does nothing to ensure any of that, and stocks most definitely aren't insured.
Forehead. Desk. Whack. Whack. Whack.
Isn't it just the epitome of perfect markets that risk and return are perfectly aligned and all you have to do is time entry and exit to be a big winner? What Kramer didn't mention needing to actively trade in order to retain higher returns? Oversight I'm sure.
Rob Dawg,
...all you have to do is time entry and exit to be a big winner?
A big winner of the new world! Yes!
Jim Cramer knows first hand that there is no such thing as a get-rich-quick scheme that can create sustainable long-term wealth...
He definitely knows first hand!
February 29, 2000
The Winners of the New World
So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?
A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now.
I'm sure he'd be the first to admit that his timing advice for taking on a little stock market risk was just a tad off in 2000.
When the bankrupt Federal government finally starts selling off its acres, buy some. (I'm following Mark Twain's apercu here.)
dearieme,
Experience has shown that, in caring for the land and water, private ownership has been our best guarantee of conscientious stewardship, while the worst instances of environmental degradation have occurred under government control. - REPUBLICAN PLATFORM: America's Natural Resources
That's why I suggest that we immediately sell all remaining publc lands to BP. You know, for their conscientious private stewardship of America's natural resources, lol. Sigh.
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