Another good article, Adam. Our industry has tried to make investing a science. It is not. Rebalancing to a fixed allocation assumes that people’s risk profiles don’t change. The fact is, over time, an unbalanced portfolio will outperform a balanced portfolio due to the higher expected return on stocks. So if you have more money by letting your stock allocation run unbalanced, you can also afford to lose more. Therefore, you have the capacity to take on more risk. This is often ignored. If it makes you feel better to keep a standard rusk profile, then go for it. But remember rebalancing does not improve returns over time. It keeps your risk level consistent. Which may or may not be appropriate.
Nice article. While I disagree with much of it, I’m glad things turned out well for this gentleman and his children. The children are obviously bright with a strong work ethic. But I suspect putting one’s self through college is more realistic in Kentucky than other states. Like New York or California. My two daughters are graduates of public universities, and I gladly paid for it. We discussed that private universities were too costly, so we did set limits. I started saving when they were young, and paid the rest as we went. No debt. I wanted them to focus on their studies and the fun parts of a college experience without the burden of paying their own way with zero help. They will work the rest of their lives. They took minimal part-time jobs for extra cash, but nothing more. Both now employed, and doing well. I also disagree with today’s obsession with STEM education (Science,Technology, Engineering and Math). Narrow and may inhibit the development of other important skills. Yes, we need engineers, but equally important are entrepreneurs, salespeople, writers, good, communicators, etc.
Comments:
Another good article, Adam. Our industry has tried to make investing a science. It is not. Rebalancing to a fixed allocation assumes that people’s risk profiles don’t change. The fact is, over time, an unbalanced portfolio will outperform a balanced portfolio due to the higher expected return on stocks. So if you have more money by letting your stock allocation run unbalanced, you can also afford to lose more. Therefore, you have the capacity to take on more risk. This is often ignored. If it makes you feel better to keep a standard rusk profile, then go for it. But remember rebalancing does not improve returns over time. It keeps your risk level consistent. Which may or may not be appropriate.
Post: Balance Issues
Link to comment from July 5, 2024
Nice article. While I disagree with much of it, I’m glad things turned out well for this gentleman and his children. The children are obviously bright with a strong work ethic. But I suspect putting one’s self through college is more realistic in Kentucky than other states. Like New York or California. My two daughters are graduates of public universities, and I gladly paid for it. We discussed that private universities were too costly, so we did set limits. I started saving when they were young, and paid the rest as we went. No debt. I wanted them to focus on their studies and the fun parts of a college experience without the burden of paying their own way with zero help. They will work the rest of their lives. They took minimal part-time jobs for extra cash, but nothing more. Both now employed, and doing well. I also disagree with today’s obsession with STEM education (Science,Technology, Engineering and Math). Narrow and may inhibit the development of other important skills. Yes, we need engineers, but equally important are entrepreneurs, salespeople, writers, good, communicators, etc.
Post: Making Their Own Way
Link to comment from June 20, 2023