>
> > It seems to me that the general consensus says that it is not worth it
> > to try to squeeze an additional 1-2% at the risk of principal loss.
> > For the sake of argument, at what point is it worth it? Maybe it
>
> At the point where you can say "well, I didn't really need all
> that money that soon anyway, and can live with some short- to mid-
> term losses along the way".
>
> Suppose you had a "buy a new car fund" and you planned on buying
> some particular car in 5 years. Unless you can either live with
> waiting a few more years, or accepting the possibility that you'll
> have to get a less expensive car, you need to invest that money
> more conservatively. If you're willing to risk the Hyundai for
> the chance that you'll get a Lexus instead of guaranteeing
> yourself a Honda, it may be worth taking your chances. Only
> you can decide.
>
This depends on the person.
My logic is how many intermediate term financial issues does one fund
each month. Intermediate term being any period which is less than 15
years.
Think of all the expenses you occur once every 15 years:
1) 1-2 cars (estimate $4000/year??)
2) house repairs (estimate $1000-$5000/year??)- roof, HVAC, driveway,
landscaping, additions, remodels...
3) college education for kids ($60,000)
4) wedding for daughter ($20,000)
5) large family vacation ($20,000)
6) whatever else for personal needs
My premise was if I funded only 1-2 of these per year, it would take
forever to get the cash needed for some of the larger items. But if I
created a "general fund" and budgeted that, the big things which occur
less often (cars, wedding, college) would clearly be a bigger chunk of
the general fund than the house repairs. If all money is in same
spot, and investment is relatively moderate in risk, the biggest risk
is the 2-4 years it takes to START this. Once started, this general
fund should have enough to
a) compound and get the big items with less cash put up by me
b) have a place in budget for smaller expenses- just stop the deposits
the month the house needs repair, or the year the landscaping gets
done (and pay cash for it).
All this money has same time horizon (more or less). The difference
is the magnitude of the amounts needed to fund the goal.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
