I agree with Fadell's thesis but I see the topic a little differently. If an investor can recognize the true long-term positive or negative potential of a company's actions vs. its current valuation they can achieve results better than index funds. To the examples of Kodak and Apple we can add Xerox, Sears, and a few other retailers wo missed the boat. I think good current examples of this future pricing uncertainty are Nvidia, TSM, and Space X. Nvidia's challenge will be competition which will come from many directions due to their huge profit margins and relatively low barriers to entry, I am reluctant to buy it in spite of its popularity. I think TSM has unrecognized value because the real barriers to competing with it effectively from a volume and manufacturing cost perspective are very high, I worked in the chip industry for a long time and understand these barriers. SpaceX is a giant question mark in my book. Everyone loves Elon but Tesla's valuation in terms of PE is in the stratosphere, the cybertruck has been a giant bomb. By contrast Starlink has been very successful. SpaceX has shown they can build rockets successfully but no responsible person would use a commercial airplane designed by their team based on their design methodology which is not focussed on avoiding system failures. Bill
I have long thought that markets always overshoot on both the upside and downside. This is how the correct value for an asset is determined. Fear and greed are the drivers. So stay diversified and relax. Bill
I think the best way for individals to minimize overall risk is to keep a "comfortable" portion of their assets in money market funds in addition to staying truly diversified with the bulk of their assets. Your returns will be small on the MM funds wrt inflation but you should sleep well at night! Bill
Adam, I am glad you mentioned the bucket approach. It is very appropriate for those who are retired and cannot have so much in stocks that they would be in a difficult position for a long time if they had to "wait" for a major market recovery. Bill
Things always change. Intel, IBM, GE, and GM were major success stories for a while..... NVIDIA's success today is attracting a lot of competition that will affect their margins in the long term. The article is either a good argument for index funds or for getting in and getting out fast! Bill
Jonathan, I and I know many others have enjoyed and learned a lot from your columns for many years. Many people have benefited from the sound advice presented here. I will be keeping you in my thoughts and hoping you are lucky in spite of your prognosis. Bill Kosar
I understand the "smart market" hypothesis which says that stock and bond prices reflect millions of investors digesting all available information and making their investment decisions accordingly. That may hold up in the very long run but if you are investing today with a 10 to 20 year outlook (assumes you are retired) and you don't have any significant guaranteed income it is hard to justify the risk associated with a 70% allocation to stocks. I tend to agree with Troutbum52's comment that we don't know what the effect of the continuing growth in US debt will be, it cannot continue indefinitely. I think John Bogle said your investment allocation should be whatever helps you sleep well at night! Good thought-provoking article as always! Bill
Richard, I strongly agree with your plan to replace 100% of your income. I have been retired 7 years and for various reasons our out of pocket expenses have stayed the same or gone up compared to what we were spending before I retired, the boogeyman of inflation is also part of this. I also agree that you should not have to "shrink" your lifestyle when you retire. Your comments to JC are a good example of how rules of thumb are good to look at and think about but are not necessarily correct for everyone. Thanks Bill
Robert, I enjoyed your article, it is a good reminder that no one is always perfect in their investing. Way too many investment decisions are based on hindsight, not foresight. One of my favorite sayings from John Bogle is that he wants to be able to sleep well at night with his investment allocation. I remind people of this a lot when discussing the topic, I sleep well at night. Particularly important as we get a little older! Glad to hear you are birding in Mexico, I have birded in Colorado, Texas, New Mexico and Arizona. The species change as you move south is amazing! Bill
Comments
I agree with Fadell's thesis but I see the topic a little differently. If an investor can recognize the true long-term positive or negative potential of a company's actions vs. its current valuation they can achieve results better than index funds. To the examples of Kodak and Apple we can add Xerox, Sears, and a few other retailers wo missed the boat. I think good current examples of this future pricing uncertainty are Nvidia, TSM, and Space X. Nvidia's challenge will be competition which will come from many directions due to their huge profit margins and relatively low barriers to entry, I am reluctant to buy it in spite of its popularity. I think TSM has unrecognized value because the real barriers to competing with it effectively from a volume and manufacturing cost perspective are very high, I worked in the chip industry for a long time and understand these barriers. SpaceX is a giant question mark in my book. Everyone loves Elon but Tesla's valuation in terms of PE is in the stratosphere, the cybertruck has been a giant bomb. By contrast Starlink has been very successful. SpaceX has shown they can build rockets successfully but no responsible person would use a commercial airplane designed by their team based on their design methodology which is not focussed on avoiding system failures. Bill
Post: Pricing the Future
Link to comment from June 20, 2026
I have long thought that markets always overshoot on both the upside and downside. This is how the correct value for an asset is determined. Fear and greed are the drivers. So stay diversified and relax. Bill
Post: AI, Bubbles, and Markets
Link to comment from March 21, 2026
I think the best way for individals to minimize overall risk is to keep a "comfortable" portion of their assets in money market funds in addition to staying truly diversified with the bulk of their assets. Your returns will be small on the MM funds wrt inflation but you should sleep well at night! Bill
Post: Managing Investment Risk
Link to comment from February 28, 2026
Excellent article.
Post: 2026 Financial Plan
Link to comment from January 3, 2026
Adam, I am glad you mentioned the bucket approach. It is very appropriate for those who are retired and cannot have so much in stocks that they would be in a difficult position for a long time if they had to "wait" for a major market recovery. Bill
Post: Index Fund Bubble
Link to comment from December 6, 2025
Things always change. Intel, IBM, GE, and GM were major success stories for a while..... NVIDIA's success today is attracting a lot of competition that will affect their margins in the long term. The article is either a good argument for index funds or for getting in and getting out fast! Bill
Post: Harder Than It Looks
Link to comment from August 16, 2025
Jonathan, I and I know many others have enjoyed and learned a lot from your columns for many years. Many people have benefited from the sound advice presented here. I will be keeping you in my thoughts and hoping you are lucky in spite of your prognosis. Bill Kosar
Post: The C Word
Link to comment from June 15, 2024
I understand the "smart market" hypothesis which says that stock and bond prices reflect millions of investors digesting all available information and making their investment decisions accordingly. That may hold up in the very long run but if you are investing today with a 10 to 20 year outlook (assumes you are retired) and you don't have any significant guaranteed income it is hard to justify the risk associated with a 70% allocation to stocks. I tend to agree with Troutbum52's comment that we don't know what the effect of the continuing growth in US debt will be, it cannot continue indefinitely. I think John Bogle said your investment allocation should be whatever helps you sleep well at night! Good thought-provoking article as always! Bill
Post: Not Scared of Bears
Link to comment from April 27, 2024
Richard, I strongly agree with your plan to replace 100% of your income. I have been retired 7 years and for various reasons our out of pocket expenses have stayed the same or gone up compared to what we were spending before I retired, the boogeyman of inflation is also part of this. I also agree that you should not have to "shrink" your lifestyle when you retire. Your comments to JC are a good example of how rules of thumb are good to look at and think about but are not necessarily correct for everyone. Thanks Bill
Post: He Asked, I Answered
Link to comment from March 9, 2024
Robert, I enjoyed your article, it is a good reminder that no one is always perfect in their investing. Way too many investment decisions are based on hindsight, not foresight. One of my favorite sayings from John Bogle is that he wants to be able to sleep well at night with his investment allocation. I remind people of this a lot when discussing the topic, I sleep well at night. Particularly important as we get a little older! Glad to hear you are birding in Mexico, I have birded in Colorado, Texas, New Mexico and Arizona. The species change as you move south is amazing! Bill
Post: For the Fun of It
Link to comment from February 21, 2024