@Pete, I realize the dollar amount might be significantly less when you are younger, but the compounding of that small amount of money over the next 30 years could easily prove to be much larger than the amount you are referring to. I still get sick thinking about losing the money I did.

I have learned a lot in the year since I last went “allin” and have done a lot more trading and less buy and hold. I have seen marginal gains, but I also didn’t lose 40%. I believe a support line exists somewhere around 8,000 for the Dow and I am now again looking to possibly dump a ton into small and mid cap indexes.

We got a good warning in 2008 to think the unthinkable…

By the way, you have great comments on your blog. If I had such comments I’d have left the option to add a comment open on Monevator.

Oh well, will just have to come here for my chatting!

Right now I hold no bonds, but once the market recovers I’ll add a small portion to my asset allocation.

For short-term traders, the market might be a zero-sum game. For the long-term, it’s nowhere near a zero-sum game.

While the value of a stock is the agreed upon price between buyers and sellers, it’s important to remember that over the long term the stock price reflects the value of the company.

If the company grows and becomes more valuable, the stock price will rise. This is not because another investor lost money (zero-sum). It’s because the company performed well and managed the business well. Growth on that basis doesn’t require another investor to lose anything.

Another thing to remember is that the market dropped 89% during the depression. 50% is nothing. It started at a high of 311.90 on 11/29/29 and bottomed at 33.98 on 7/7/32. Think it can’t happen again? I hope not as well. But don’t think that just because we’re down 50% that it cannot go further.

“Investing” into this market isn’t really investing — it’s gambling. Sure, plenty of people are making lots of money… but for every person who makes a dollar in the market, someone lost one somewhere. It is nearly a zero-sum game.

For more medium and short term goals though, you have to weigh your acceptable timeframe.

Now with that being said, I am an absolute proponent of being 100% in stocks ( even through your mutual funds ) for a very, very long time. Why? Because many of these stocks that you own supply you with not only appreciation but also dividends, and those payments help you to generate income with little to no effort and provide an offset during market declines.

So I echo your sentiment of being more heavily invested in the stock market in general, and for those who are more risk averse, look to holding balanced funds and growth and income funds to give yourself some “security” ( pun intended!! )

Great post. I’d say I have to agree with you. For a young investor, it doesn’t make much sense to go with anything less than a 100% stock portfolio unless you’re really risk averse.

Oddly enough, I just finished a post about a diversified 100% stock portfolio that will be published tomorrow (December 2, 2008). I cover some quick facts about this type of portfolio. I could have included a lot more, but I think those detailed numbers bore most people and don’t make sense to many more. (I know you’re an exception to both.)

I have a lot of good data on portfolios like this. Let me know if you ever have some burning question that you’d like to know the answer to (from a historical perspective).