A Reader’s Question:
Dear John: I have a friend who wants to know what to do with his money. I know Charlie Munger suggests investing in cheap index funds for a “no-nothing” investor. But aren’t there problems with indexes? What do you think?
Well, especially now when most bonds (especially government bonds) seem high risk for no-or-low return, the first question would be what should that person allocate towards equities.
I am working on my answer, but thought YOU have advice for this reader.
The links here:
- Historical Returns The Case For Equity J Siegel
- Inflation Swindles the Equity Investor by Buffett
all provide a case for equity investing. However, when you hear that historically the stock market has returned 8.6% or 9% for the past 200 years, it is a little like saying the average height of the person in this room is five foot five inches tall. The room has a pro basketball player standing tall at 7.5 feet and a dwarf in the corner at 3.5 feet–the average is 5.5 feet. People are still seared by this experience in 2007-2009.
I will post my response tomorrow.