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Broker Check

"Manage" Your Own Money Using Just One Equity Investment? Good Idea? Terrible Idea?

| April 20, 2016
Retirement Investing

Source: Live Speech by Jane Bryant Quinn

I'm not one to believe the following which might be classified as humor, but you decide.  The saying is that if you put enough monkeys behind enough typewriters (remember typewriters? Yikes!) eventually, one will write a best-seller.

Admittedly, that's an odd juxtaposition of thoughts.  Just my way of saying that I don't think in a million years would I have come up with the above idea on my own.  (Using just one equity investment.)  But, after I heard Jane say it live and I thought about it for a few days, I found it interesting if not actually compelling

Indexing ("passive") vs trying to Beat the Market ("active")

To potentially understand why I might ... in certain cases ... maybe ... agree with Jane for some people, it is first important to understand my viewpoint about indexing -- also known as “passive," as opposed to trying to Beat the Market, also known as “active.”  I have written about this topic many times before.  (Should "active" management be criminal?)  Very interestingly perhaps, a recent Stanford Business School Study did show persistent success for some managers in outperforming the market.  “Persistent” and “outperforming” being the two key words.  But … the same study showed that while the managers benefited from this superior performance, individual investors rarely did. 

If you listen to Jane ... go to her website ... read her stuff ... she becomes even more adamant.  She is the journalist version of a "quant."  She knows her numbers and her data.  She further said ... “You are paying your manager to fail.”      (If you attempt to beat the market.)  Her conclusion – invest in very low expense index investments.

I briefly digress.  Bonds or fixed income investments are an entire different universe.  So the above viewpoint from me applies only to stocks / equities.  Jane took her point of view one big step further.  She recommended to the audience they place their index investments into one (albeit very diversified) investment.  One investment.  Could that ever make sense?

Jane has one advantage over those of us who hold licenses.  She is a journalist.  Free speech. With very few restrictions, she can say whatever she wants.  But she has a large following.  She's been at this a long time.  She is obviously smart.

As I have also mentioned previously, I consider Retirement Income Planning to be of critical importance to the great majority of us.    I also consider Guaranteed (Joint) Lifetime Income to be a very important, if not absolutely critical, element of a retirement that makes the vast majority of people happy … or at least happier than they would be otherwise.

So then suppose that you the retiree or the pre-retiree couple or individual ...

  1. Have arranged your retirement income so that you have covered all your “need” living expenses. 
  2. Are proficient and comfortable using the computer and the phone.
  3. Have no difficulty gathering any information you might need ongoing. (You are comfortable doing your own service.)
  4. (Critical)  Do not plan to draw ongoing regular income from this one pool of money.  Drawing ongoing income makes the task much more complex.  "Don't try this at home, kids!"

Under those circumstances, I’m not too worried about your stock investments at all.  So you could conceivably simplify your life with just one item in that one “bucket.”