Investing formulae
My knowledge of investing is very limited. I don’t understand the stock markets well enough to invest in it and I don’t own any stocks. I am trying to learn about it and ever since I started there hasn’t been a single person who hasn’t advised me to “Subtract your age from 100 and invest that percentage of your savings in stocks, with the rest in bonds”. That’s all there is to know, it is that simple. If you want to loose your wealth please follow the above formula.
It is very easy to disprove this formula. In fact it is so easy to prove it wrong that I will do it twice. One why would a 25 year old saving for his first house put almost all his money, assume 25,000$, in the stock market? If he did he will never buy that house.
Let’s consider another scenario, a 75 year old, with 2 million. Why in his right sense of mind would he put all his money in bonds? Assuming that his grand children will inherit his wealth they have decades left for investing.
Clearly this formula is flawed, don’t use it unless you want to loose your money. I am convinced there is no one magical formula for investing.
