The long view
It is not for everyone
This post is to tie together the lessons learned that I gleaned from Roger C. Gibson’s book - “Asset Allocation” (Fifth Edition).
I want to put it together with this starting point, which I wrote previously. Gibson pointed out that "retirement horizon" should not be confused with "investment portfolio time horizon".
Investment time horizon starts now through retirement start and then beyond - all the way until I will not need money anymore. Either when I am dead or when someone else provide the funds for me. This can be quite long.
Therein lies the point of part 1 - the impact of inflation on retirement. So my savings needs to grow while giving me sufficient income to live during retirement. But there are risks when putting the savings on asset class(es) that can outperform inflation.
To address the risks, I wrote in part 2 about the impact of volatility and in part 3 about diversification effect. But I cannot eliminate risk completely.
The homework is to assemble a portfolio that can provide “paycheck replacement” to fund my costs and “principal growth” to address inflation risk.
At the same time, I want to balance my present time so I enjoy it to the max also. I wrote about it here: How do you want others to remember you? This topic is important to me.
And therefore by “principal growth”, I do not mean it must keep increasing in absolute sense. It can decrease, but not to the point of it running out. The important thing is that it can always be available to fund the target lifestyle of making memories and leaving memories for as long as I breathe.
I am still trying to figure things out. And so far the journey is interesting.
Have a great day.
Disclaimer: Anything I share is not intended as financial advice; I am merely sharing personal opinions and experiences. The information is of general nature and you should only use it as a place to start your own research and you certainly should do your own due diligence. You ought to seek professional financial advice before making any decisions.