February 5, 2015 at 6:15 pm #15690
I am trying to figure out where to invest my savings which are currently in CD’s and a bank savings account.
I have recently been reading a book, “Money – Mastering the Game,” and within this book Warren Buffett is quoted in saying, “Put 10% in short term government bonds and 90% in a very low cost S&P 500 index fund.” This is his advice for what he wants his wife to do with their trust upon his passing.
Would this be good advice for someone that has amassed $100,000 of savings in a savings account and is fearful of losing their hard earned savings by putting it in the market? Let’s just assume that the this person would set aside a year’s worth of savings ($70,000), in case sh*$ hit the fan. What advice would you give for allocating the $70,000, to a 10% bonds/90%S&P500 portfolio? I know that a person’s risk tolerance is a variable but lets just assume that he/she is moderate to high in risk tolerance. Is this sound advice for someone that has a significant amount of savings within his/her savings account that is looking for somewhere it can safely grow? What would be your allocations to short term government bonds/S&P500 for varying tolerances in risk,
Moderately Risk = _% Bonds _% S&P 500
Moderate to High Risk = _% Bonds _% S&P 500
High Risk = _% Bonds _% S&P 500
Lets also assume that Vanguard Funds would be used to invest in.
Thanks!!February 6, 2015 at 1:21 am #15706
Buffett is giving excellent advice for people who just don’t want to learn about investing and don’t want to spend any time making decisions. That is a buy and hold forever strategy.
That’s not how Buffett actually invests any of his money, because he is sophisticated enough to know that strategy will get a very average return.
I would never advise against doing that, as it is a slow but safe way to build a nest egg. But it isn’t even the best buy and hold forever strategy out there (and he knows that). He has chosen that one because it won’t be excessively volatile. If you follow the numbers, the best buy and hold forever strategy would be to buy a small cap value fund.
The TSP Allocation Guide www.TSPallocation.com
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