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Meeting Your Goals without Stocks

The following comment was made on the Boglehead forum the other day:

“The financial-advice community has been seducing everyone into setting goals that cannot be met with low-risk investments, and then seducing people into drawing the logically fallacious conclusion that therefore, they should accept high-risk investments (rather than changing their goals). It’s akin to seducing everyone into accepting debt because it’s the only way to buy stuff you can’t afford, rather than not buying stuff you can’t afford.”

I found myself nodding emphatically as I read this. It’s very similar to what Carl said recently about adjusting other variables if you don’t want to own stocks.

On this blog I often suggest that investors keep rather high equity allocations. A large part of the reason I do that is because–from what I’ve seen–most investors’ goals are somewhere along the lines of “retire at 60-65, never work again, and travel the world.”

And if that’s your goal, you probably do need a good deal of money invested in stocks.

Of course, that’s not everyone’s goal for retirement. It sure isn’t mine.

If your financial goals are more modest–or more specifically, if they involve continuing to work later than age 65 or if they aren’t centered around a hobby as cost-intensive as world travel–then you very likely don’t need such a high stock allocation.

This should really be common sense. There’s no one perfect asset allocation for an investor of a given age. There are simply too many other variables. The only thing that the asset allocation rules of thumb can really provide is a starting point for discussion/analysis.

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  1. Miranda says:

    Great post! I agree that we seem to have a warped idea of what is “normal” or what we “need” in retirement. Indeed, all of retirement planning, it seems, revolves around trying to hit a “magic number” that allows you to retire and never work again by age 65. But I agree with you. That’s not really my goal. My husband and I are actually working on plans that allow for some mini-retirements along the way so that we can enjoy life while we’re young. It’s why I’m a writer and he’s working to become a consultant; these are flexible jobs that let us do a lot of what we want now — rather than waiting until we’re much older.

  2. “My husband and I are actually working on plans that allow for some mini-retirements along the way so that we can enjoy life while we’re young.”

    Sounds good to me! 🙂

  3. Personal finance and investing is a tool for achieving your life goals.

    Obviously we all have different goals. All advice should be done on a person by person basis. Yes, even such caveats as start investing early, save, do stocks, etc…

    If one’s goal were to die early and live a beautiful statue than investing early may make that more difficult =)

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