QUESTION: I saw this article in The Economist? Should I put all my money into stocks (equities)?
ANSWER: It really depends on how rich you are.
If you are poor, you need money for the basics: food; shelter; and, clothing. If you have cash, you aren’t going to risk it on buying risk-assets; crypto currencies; or, even, lottery tickets (although some hard-core pragmatists would argue that makes sense).
As you get richer, you want to spend more on yourself now and in the future, so you need to think about investing (returns and risks) and how that will correlate with your spending for needs and wants. At this stage having some equities makes sense.
Get even richer, and you need to add legacies (for family, friends and philanthropic interests). Hence, you are interested in longer term returns and can wear the fluctuations in the markets for risk-assets.
Let me give you an example of an 80 year old woman; she owns a beautiful house ($15m); her investment portfolio is $11m; has about dozen grandchildren, etc; and, has some philanthropic interests. This investor put all her money into equities and every year, despite market fluctuations, has spent more on Christmas presents for her family, spent more on other discretionary expenditures, each year. With measured drawings, and long term returns of equities, she has optimised her utility. The size of her portfolio compared to drawings means bear markets have been irrelevant to her.
Contact TurnerStreet if you wish to buy our current asset allocation recommendation (we do cash and equity only allocations for our wholesale clients), and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.