Replies to post #239 on The "Stock Trading Riches" Investment Sy

[PraveenP]

Hi Greg,

I was closing out part of my Google account, and it also closed my blog (since Blogger is owned by Google). That's one of the downsides to the way they keep merging stuff into one account :-(.

I am going to start a new blog.

The Stock Trading Riches system should work nicely - I would try and maintain a minimum of 30%-40% in the cash/ST bond portion and, in the stock portion, maybe 10% in a long term bond ETF (that is rebalanced as a stock). For the rest, you can do stock ETFs, mutual funds, and/or individual stocks.

The main thing about stock ETFs and mutual funds is not to hold broad-based index ones (such as the s%P 500), because the diversification within the fund will make it fluctuate less, so they are not good for rebalancing.

It would be better to buy individual stocks and/or sector or industry based ETFS and funds.

For example: communications, financial, banking, small cap, value, growth, etc.

Praveen

[ls7550]

a 79 yo man who has 450k that he has to live on and invest with. He'll need to get income from the money, but also he'll want it to grow

Secure your minimum income requirements and grow the rest.

If for instance you have a pension of $15K, live in your own home that's worth $300K that you might otherwise have had to pay $15K/year to rent, and can live off $30K disposable income then :

Initially allocate
$150K out of $450K invested in a ten year TIPS ladder with a view to drawing that down over 10 years ($15K/year)
$300K remainder invested in stocks on a growth basis (reinvest dividends).

After 10 years if the stocks have grown by 50% in inflation adjusted terms (around 4.1% annualised real) you'll have the equivalent of $450K in stocks (in inflation adjusted terms), but have drawn down bonds to zero.

Reset/repeat for another 10 years ....

With $15K/year bond drawdown, another $15K of imputed rent from your home value, and another $15K of pension, that's like having a $45K/year net wage, but spending a third of that on renting a roof over your head (home). Income being sourced from a pension and drawdown of TIPS is safe against inflation and consistent/stable (assuming a inflation linked pension).

The main risk is longevity (stocks not having grown adequately enough after 10 years). But equally they might grow quicker than the target 4.1% annualised real rate (its not impossible for stocks to gain 50% in inflation adjusted terms in a single year or two).

Regards. Clive.