Thursday, 25 June 2009

Forget about Everything Else and Buy Only Stocks

Believe it or not, there are some investors who are convinced that common stocks - and common stocks alone - are the royal road to riches.

"A good friend of mine has never bought anything but stocks, and he's been doing it for many years. He even went through the severe bear market of 1973 - 1974, when stocks plunged over 40 percent. He wasn't exactly happy to see his stocks being ground to a pulp, but he hung on. Today, he is a millionaire many times over. He's now 60 years old, still a comparatively young investor. His name is David A. Seidenfeld, a businessman in Cleveland."

David Seidenfeld got his start by listening to the late S. Allen Nathanson, a savvy investor who wrote a series of magazine articles on why common stocks are the best way to achieve great wealth. David Seidenfeld recently collected these essays and published them as a hardcover book, Bullishly Speaking.

If you start investing early, such as in your forties, this method can work. If you systematically invest, setting aside 10 or 15 percent of your earnings each year and doing it through thick and thin, you won't need any bonds, money-market funds, or any of the other alternatives that financial magazines seem to think you must have. You will arrive at retirement with a large portfolio that will enable you to live off the dividends.

However, if you arrived late to the investment party - let's say in your late 50s or early 60s - you may not be able to sleep too well if you rely entirely on common stocks. After all, stocks have their shortcomings, too. They tend to bounce around a lot, and they can cut their dividends when things turn bleak.

Read also:

The story of Uncle Chua
Uncle Chua's Portfolio & Dividend Income


Related posts: Some Simple Formulas for Asset Allocation
How Much Should You Invest in Stocks?
Asset Allocation is not the same as Diversification
A Simple Approach to Asset Allocation
Forget about Everything Else and Buy Only Stocks
Some asset allocation options to consider
A favourite Formula for Asset Allocation

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