Sound Investing The Biggest Mistake Investors Make
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Aug 27, 2025 Discover the critical mistakes investors often make, such as the debate over adding bonds, even in retirement. Learn how the Ultimate Buy and Hold Portfolio has performed and why diversification is crucial. Explore the importance of tailoring investment strategies to individual needs instead of simply chasing higher returns. Gain insights into balancing risk with potential rewards, particularly with small-cap value stocks. This discussion emphasizes the need for prudent financial advice, especially for those nearing retirement.
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Cost Of Abandoning Equities
- Nick Murray argues retirees shouldn't shift to bonds because equities historically deliver much higher real returns than bonds.
- He warns abandoning equities sacrifices roughly half the long-term real return historically earned by stocks.
Equity Premium Comes With Huge Drawdowns
- Stocks earn more because they represent ownership in growing companies, but that comes with big downside risk.
- Paul Merriman emphasizes the reality of large drawdowns that can last years and devastate retirees drawing income.
Long Flat Markets Hurt Retirees
- Merriman recalls the 1960s–1982 market that repeatedly failed to break a peak, punishing long-term equity retirees.
- He uses Microsoft’s 2000–2016 flat period to show even great companies can take decades to recover.