FREE NEWSLETTER
I GREW UP DURING the muscle car era. That was when Detroit automakers became aware of the baby boomers’ buying power.
The boomers, of whom I’m a proud member, didn’t live through the Great Depression. We had television, frozen foods, Mattel toys and a car in every driveway. Prosperity is what we were used to, and we loved it. It seemed everyone had jobs, so there was money to spend.
My friends and I felt that having a nice car was the key to getting that special girl. This led boys to modify their jalopies to become hot rods. Seeing all this tinkering under the hood, Detroit decided to deliver fast cars right out of the showroom. No mechanical modifications were required to smoke your tires. The muscle car era had begun.
What made these cars pop? In the beginning, it was simple: bigger V-8 engines. But these engines were gas guzzlers. When gas prices surged in 1980 to $1 a gallon and higher, car buyers still wanted speedy cars, but with more miles per gallon. The auto industry came up with two ways to increase horsepower without increasing the engine size—turbocharging and supercharging.
With turbocharging, a fan blade spins more air into the engine’s cylinders, while another blade sucks out combusted fumes. More air going in draws more gasoline, resulting in a bigger bang and more horsepower. It doesn’t take any power from the engine to produce this increase in horsepower.
The second way is supercharging. A blower forces more air into the engine. A pulley belt is attached to the engine to run the blower. It takes power from the engine to produce more horsepower. That makes it less efficient than turbocharging, but it can be faster off the line in short bursts.
What does all this have to do with managing money? You can attempt to supercharge your wealth by investing a great deal of time and money in software to identify the stocks with seemingly strong prospects. This method can make you feel more in control—you have a reason for purchasing the specific companies you own.
Alternatively, you can take the more efficient route, and turbocharge your portfolio by investing in index funds that own everything, even those stellar stocks you’ve never heard of before—stocks like chip maker Nvidia, whose shares jumped 237% in 2023 on the back of the artificial intelligence revolution.
Buying an index fund can seem boring compared to stock picking. There’s no deciding when to buy or sell, no cocktail party stories to tell. You simply own the entire index and go along for the ride.
Yes, you’ll miss the elation of picking a stock that races ahead of the broad market. But what if your hot rod stock misfires? You’ll wind up behind the pack, languishing on the side of the road. Which car do you want to drive?
David,
I forgot to add a comment about my investments.
I am 100% in Vanguard, VTI & VXUS (80-20.) My fixed income investments are my social security and a series of FIAs with Income Riders. Our portfolio is essentially 50-50, plus 3 years of cash.
I love watching them grow, especially knowing I don’t have to draw them down to live.
David,
What a neat analogy! Muscle cars. I was born in 1950. The first muscle cars came out in my teenage years. I never owned one but I always admired them. The closet we came was a 1996 Ford GT Convertible Mustang. Red and Tan, with a Tan Leather Interior.
Just this week, I was watching some You Tue Videos and a Barrett-Jackson Auction video popped up. I clicked in it and saw my all time dream car sold for $167,500. It was a 1962 M Model Ford Thunderbird Convertible. Red and Chrome and gorgeous.
Now I would never even consider a purchase like that, but it got me to thinking about a “regular” non-M Model 1962-64 T-Birds and I began looking them up on online. Guess what? There are 1962-1964 T-Birds, rebuilt and reconditioned to like new status for ONLY $50,000. And I am a lucky man, because my wife doesn’t think that purchase is unreasonable.
Will I actually pursue it? Probably not, as I don’t have a garage to put it in, but it’s fun to know I could if I wanted to.
Thanks for a fun article.
I diversified across fuel sources and added a BEV to my driving experience 🙂
I loved my Mazda MX6 turbos enough I had three in succession, but they were hardly muscle cars. I also love my Vanguard index funds. They just sit there, quietly growing (mostly) while I ignore them.
Jeez Dave, I loved my 1970 Mark Donahue Javelin, 1 of only 2501 produced and the best looking of all the pony cars IMO. But the sad truth is that the new 2024 Prius will blow it’s doors off and get 50MPG while doing it. I wish I could get that Javelin back, but when it comes to investing I’m driving the Prius.