10/05 12:37 ET
The question answers itself. For those who value optionality, having optionality has real value. I have spent so many years learning that market timing tends to fail that I would be looking for an investment opportunity other than cash.
Charles D. Ellis, Greenwich Associates Founder
10/05 12:39 ET
So you are advising your grandchildren at age 15 to put money in equities instead of index funds? The word “compounding” comes to mind.
(Selfish interest here: My 13-year-old son just celebrated his bar mitzvah and he’s asking what to do with the generous gifts people gave him.)
Janet Lorin Investing Reporter
10/05 12:40 ET
To me, putting money equities means putting money into equity-indexed funds. I don’t know how it will work out over the next five years, but I do know how it’ll work out over the next 25 or 50 years.
And for a 13-year-old, 50 years may be too little, so maybe you ought to be thinking about 75 years. And the easy answer is equity-indexed funds.
Charles D. Ellis, Greenwich Associates Founder
10/05 12:41 ET
One fascinating further follow-up on Janet’s question is that it’s hard to teach financial responsibility to youngsters when savings accounts pay no interest at all!
Fidelity is even offering special brokerage accounts for teenagers, which Bloomberg Opinion’s Brian Chappatta wrote about here: Fidelity Lets Teens Trade Stocks? It’s Not Daft: Brian Chappatta
How exactly do we get people to think responsibly when no risk means no reward?
John Authers, Bloomberg Opinion, New York
10/05 12:42 ET
Teaching financial responsibility to youngsters is always difficult, and it’s surely harder now than it’s ever been. My own focus would be on explaining how dreadful credit-card debt is and the power of compounding.
For example, helping people understand the rule of 72 can help people who are young think the right way about the longer term and the value of the snowball.
Charles D. Ellis, Greenwich Associates Founder
10/05 12:43 ET
Endowments did well this year—once-in-a-generation well. Just like when an investor has a good run, the question is what to do with the money?
Washington University in St. Louis just announced that it will spend $1 billion of its $6 billion gains on financial aid.
How should schools be spending these extraordinary gains?
Janet Lorin Investing Reporter
10/05 12:44 ET
Each institution should make its own decision, but it would be hard to beat investing substantially in scholarships that would enable more young, talented people to get a great education.
Charles D. Ellis, Greenwich Associates Founder
10/05 12:45 ET
With inflation rising, is it safe for a recent retiree to even think about long-term index investing?
John Authers, Bloomberg Opinion, New York
10/05 12:45 ET
Of course my answer would be that each individual should have or soon develop an explicit plan in writing what they’re investing, focused entirely on what’s really right for them, and this would include their way of thinking about risk and their capacity to live with inflation.
Getting the right answer to this important question is certainly not easy. But avoiding a major mistake is worth the time and effort that it takes.
Charles D. Ellis, Greenwich Associates Founder
10/05 12:46 ET
Final question, from a reader:
“Is it possible we are at a moment in time for another one of those 18-year flat real return periods?”
And I’ll add—as it’s obvious that’s possible, could Charley kindly call the market for us and put some kind of probability on this?
John Authers, Bloomberg Opinion, New York