Dilbert’s Unified Theory of Everything Financial’

Thanks to Paul Farrell, we learn that "Quietly hidden in Adams’ groundbreaking work is a financial formula so simple it rivals Einstein’s E=mc2. In its original form Adams’ formula was apparently so heretical and so explosive that no major house would touch it when he proposed publishing it as a one-page book. After initial rejections, he announced sadly that "if God materialized on earth and wrote the secret of the universe on one page, he wouldn’t be able to find a publisher" either."

Fortunately for America’s 95 million investors, Adams’ secret nine-point formula was finally revealed in "Dilbert and the Way of the Weasels." Notice its simple brilliance in the exact reproduction of his formula:

1. Make a will

2 .Pay off your credit cards

3. Get term life insurance if you have a family to support

4. Fund your 401k to the maximum

5. Fund your IRA to the maximum

6. Buy a house if you want to live in a house and can afford it

7. Put six months worth of expenses in a money-market account

8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement

9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Adams boldly states that this is "everything you need to know about personal investing." In just 129 words, nine simple points, one page you have the unabridged "Unified Theory of Everything Financial." That’s it. Everything!

Thanks to Adams’ formula, the average irrational investor can ignore Wall Street: "Everything else you may want to do with your money is a bad idea compared to what’s on my one-page summary. You want an annuity? It’s worse. You want a whole life insurance policy? It’s worse. You want to invest in individual stocks? It’s worse. You want a managed mutual fund instead of an index fund? It’s worse. I could go on, but you get the point."

‘Dilbert’ deserves the economics Nobel:
‘Unified Theory of Everything Financial’ wins in parallel universe

Paul B. Farrell
MarketWatch, Last Update: 7:46 PM ET Oct 9, 2006

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  1. blam commented on Oct 15

    I remember that weird sensation as the MassacreDAQ P/E reached 400 X. Every reason for the rise was given. The warning signs were everywhere and ignored completely.

    We had just gone through the biggest wall street hype job that I had ever seen, Y2K. A company with a sock puppet mascot and no business was at valuations approaching GM. wall street was pouring buckets of boiling shit on the “bears” as they sucked in more and more retirement money.

    The current version of the commodities market was being played out in the energy trading swindle. Green$pan proclaimed that the economy appeared rock solid and growth would continue, unimpeded.

    Then wall street massively shorted the market and took it down, down, down. Every day I drove by a brokerage that posted the Dow closing. Down 80, down 110, down 30, down 60, down 158, up 2, down …………….

    Sometimes, it pays to just sell the stock index and wait to see what happens.

  2. bob commented on Oct 15

    Why should I contribute to IRA if IRA is not deductible?

  3. wcw commented on Oct 15

    That advice is for a 30-year-old working stiff. If you’re a 70-year-old retiree, point 8. should have tipped you.

    In a single sentence in a single panel, Adams managed in the late ’90s to sum up all of Wall Street (PNG).

  4. Leisa commented on Oct 15

    BR, off-topic, but I was listening to Jim Paplava’s show. Is it true that Lowery has capitulated and the expected downturn was merely a correction in a long term bull? I don’t ask that to be “prickly”, but it seems like all of the technicians have it either wrong or were early. I personally feel like that the unprecedented liquidity is causing the conundrum, but what do I know? Nothing, really! It would be terrific for you to do another check with Lowery for RM and here.


    BR: I’ll ask Monday . . .

  5. JWC commented on Oct 15

    Bingo… My husband and I pretty much followed those rules, with one addition… live below your means. We retired when he was 55 with a million in investments, now with a different mix of bond funds and index funds. (I think the index funds are now between 25 and 30 %). We have lived off the investments with a withdrawal rate of about 4% (or less if we don’t need it).

    No big fancy jobs, at retirement he was making about $75,000 a year and I was making $45,000. It can be done.

  6. Mike commented on Oct 15

    Saw this [msnbc.com], thought some people might get a kick out of it.

    From the article: The great boom in US house prices that abruptly petered out in recent months was caused by increased global integration, not loose monetary policy, Alan Greenspan, the former chairman of the Federal Reserve, has claimed.

    “I don’t think that the boom came from a 1 per cent Fed funds rate or from the Fed’s easing. It came from the collapse of the Berlin Wall,” Mr Greenspan told a private audience in Canada on Friday.

  7. Eclectic commented on Oct 15

    Generally I think this plan works, but not because of the steps, per se, but because of what following them reveals about an individual who might follow these steps.

    That type stands out from the common individual in U.S. society at present. My guess would be that less than 10% (of the bottom 90% income earners in this country) have remotely close to 6 months of net living expenses set aside.

    These steps indicate an attitude of frugality and a pattern of planning, of being industrious and having foresight. These type individuals are likely to get along pretty well regardless of their subsequent level of assets, and this plan will benefit them greatly as long as they have the foresight to modify it according to risk.

    But, even still… number 8 can sneak up on you if you don’t pay attention.

    “8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement”

    …..and I’ll tell you why.

    It’s because the writer of that plan hasn’t taken into consideration the fact that, though the plan is very intelligently organized and outwardly simple, many individuals who might have been in their 20s and 30s and beginning to raise a family in say, 1900, would’ve been in their 50s and 60s during the period of about 1929 to 1940… and possibly wiped out financially if they’d had a plan with a number 8 step and failed to modify it… in time.

    What I’m saying is that the writer of the plan hasn’t lived long enough… yet… to feel the need to alter step number 8 to reflect the reality of market risk.

    It’s because the execution of number 8 builds into the executor of the plan a sense of being impervious to outside influences. His very success… when the stakes are low, during the accumulation phase… is what leads to the potential destruction, at a later time, when he’s entrenched in the plan and determined to persevere. At later stages when the stakes are then very high, he may be tempted to stick with his baby far too long.

    If you doubt this, you are ignoring the reality of the 1920s, when the “Roaring Twenties” would have done anything but influence an operator of this plan to get out of the stock market.

    He’d never paid attention to P/E multiples and frankly couldn’t have cared less. He was too busy making a living, raising children, and sending checks to the funds every month (yes, I know there were few mutual funds before 1929, but if you read Galbraith’s ‘The Great Crash’ you’ll understand there were plenty of equivalent investments then).

    That part of 8 that says: “… and never touch it until retirement,” might be harder to execute than it is to write about. Why?

    Because in order to facilitate a timely decision, the operator of the plan has to, at some time, begin to do something he’s never done before…. think for himself about his investments. The problem is that thinking during this time is very likely to put him at cross purposes with the most dangerous person at that time in his own environment… himself.

    Consequently, even if the risks are possibly too high for our particular individual at that time, he’ll be mentally and emotionally committed to staying on a train that will cross every single bridge it comes to, impervious to any and all risks of the status of the bridges involved.

    There’ll be a party going on in the dining car, and at the party they’ll be celebrating the step 8 that put them on it.

    And, the market is a bridge that doesn’t care about you… or about this plan… or about your success or failure… or about BR and his investment philosophy… about mine (a nobody)… or Kudlow’s or Cramer’s… or anybody’s opinions whatsoever. It only knows it’s a bridge.

    Plan step 8 might come to you some day if things don’t go right and say: “Listen, I’m very sorry that you became married to me over all those wonderful years… but, unfortunately, you see it’s come time to say, I want a divorce, and I want half the money as well. That’s fair, don’t you think? I mean I’m leaving you half the money and I think that’s pretty reasonable.”

  8. KL2005 commented on Oct 15

    Absolutely a terrific and simple plan.

  9. Blissex commented on Oct 15

    «We retired when he was 55 with a million in investments, now with a different mix of bond funds and index funds. [ … ] No big fancy jobs, at retirement he was making about $75,000 a year and I was making $45,000. It can be done.»

    It is so easy when according to IRS statistics your household income is well into the top 20% of households, and probably into the top 10%, and you have been investing through the big secular boom of the past 20 years. From your numbers probably neither of your had a major illness or an extended period of unemployment during your working life.


    «For all age groups except those 70 and older, the odds of a temporary spell of poverty doubled in the 1990’s… For example, during the 1980’s, around 13 percent of Americans in their 40’s spent at least one year below the poverty line; in the 1990’s, 36 percent of people in their 40’s did, according to the analysis.»

    So perhaps the 9 points should have a 10th added:

    10) Get an income in the top 20%, a safe career with no
    long spells of unemployment or illness, and a couple
    decades of bull market just before retirement.

    There is another interesting aspect to your profile: people like you, middle aged and older, with retirement savings, are the ideal political base for deflationist and authoritarian style policies, because you are fully vested asset owners…

    * Immigration? The cheaper the salaries of our maids and nurses the better.

    * Interest rates? The higher our returns and the higher the dollar the better.

    * Law and order? Lock up everybody under 30 and/or with a shade of darkness to their skin, better safe than sorry.

    * Terrorism? The presumption of guilt and torture can only make us safer, and you can never be safe enough.

    * Taxes and government? The smaller the better, our assets cover us fully.

    Now perhaps this is not the positions you and your husband have, but they are the natural way of thinking of older and wealthier voters: ”f*ck you, I am fully vested”.

    The problem is that the inflation party has fewer but very influential members, that is the USA government and everybody else who has liabilities where you have assets.

    The party of creditors has taken over the Republicans and a large chunk of the Democrats; but the party of debtors is becoming bigger and more determined (mortagees for example), and if Bernanke stops throwing money at creditors and bails out debtors the resulting inflation will wipe out retirees.

    Right now bulls and bears are both wrong: Bernanke has not been forced to make up his mind yet. The outcome is undetermined.

  10. Blissex commented on Oct 15

    «That type stands out from the common individual in U.S. society at present. My guess would be that less than 10% (of the bottom 90% income earners in this country) have remotely close to 6 months of net living expenses set aside.»

    Sure, but “Dilbert” is the sort of cartoon that addresses the issues of 20-30 somethings on an engineering/corporate career with a salary in the top 20%. Usually young, single and healthy like Dilbert. For these it is not difficult to accumulate those savings (many don’t of course).

    For working class middle aged workers with families things are a bit more difficult, but of course that can only be because because they are lazy and spineless like the poorer 80-90% of the USA workers. :-)

    «many individuals who might have been in their 20s and 30s and beginning to raise a family in say, 1900, would’ve been in their 50s and 60s during the period of about 1929 to 1940… and possibly wiped out financially if they’d had a plan with a number 8 step and failed to modify it… in time.
    What I’m saying is that the writer of the plan hasn’t lived long enough… yet… to feel the need to alter step number 8 to reflect the reality of market risk.»

    And what can do the average person about the «reality of market risk»? Time the market? Sell all their retirement stocks August 1929?

    What rule #8 says is that the average investor cannot time the market and cannot even pick stocks, so they have to take the bad bits along with the good bits, and just pray that they don’t get a bear market in the last 20 years of their career.

  11. Caver commented on Oct 15

    I’d like to add my voice to those above who suggest that the “don’t touch it til retirement” part is too severe. Two things…if you see a train wreck coming change your holdings–at least go to cash. As Ed Easterling and others have pointed out…when you take a big loss with compounded returns…it hurts.

    And, after reading David Swenson’s book, make sure you REBALANCE the 70/30 (or whatever %). Cash out the overvalued and plow it into the undervalued. But wait…this is investing, I thought BigPic was about chasing hot stocks 8^)

  12. Jim Bergsten commented on Oct 15

    Those arguing against rule #8 are forgetting that it’s rule #8 (and not #1, #2…), and are not reading the first five words of the rule.

    For most, “whatever is left” is zero if they’re lucky.

  13. V L commented on Oct 15

    It is slightly off the topic.

    Online brokerage account scams worry SEC

    “WASHINGTON (Reuters) – High-tech crooks are hijacking online brokerage accounts using spyware and operating from remote locations, sometimes in Eastern Europe, U.S. market regulators said on Friday…”


  14. M.Z. Forrest commented on Oct 15

    I guess I’m unimpressed with the rules. There are ways to retiree without ever investing a dime in stocks or bonds. The idea that one needn’t be deterministic with their retirement is rather modern phenomena. The principle of diversification, the idea that if you put enough stuff in a bucket it won’t all turn out to be sh–, is also present. It reminds me a lot of the folks who say if you put away $500 a month starting when you are 20, you’ll have a boat load of money.

    My simple rules:
    1) A comfortable, let alone a wealthy, retirement is the exception, not the rule.
    2) Very few will be able to have a comfortable retirement if over 30% of their income goes to housing expense throughout their life.
    3) Your typical person from a reaching for retirement perspective cannot afford a car, let alone two cars.
    4) If you want to retire comfortably, never ever get seriously ill.
    5) You will make most of your money and contribute most of your savings between ages 40 and 60. You should have most of your capital items (house) funded at this point. Don’t fund them again.

  15. eh commented on Oct 15

    “Why should I contribute to IRA if IRA is not deductible?”

    Because the earnings are tax free.

  16. Gunther commented on Oct 15

    Mike, Greenspan said that the great boom in US housing came from the collapse of the Berlin Wall. The Wall collapsed 1989, way before the housing boom. If someone believes Greenspans claim, go ahead. To me that piece of news looks like another proof of incompetence of the one giving a speech and the financial press.

  17. Eclectic commented on Oct 15

    Greenspan is right about the Wall coming down being the beginning of the housing boom, but let’s look at the logical flow of cause and affect.

    Really, the ‘Wall’ is older than Berlin and Reagan… it stretches way back… way back to Nixon in China in the early 70s. That’s when it really started to come down.

    Our budding detente with China put another front onto the cost structure of the Soviet Union’s military budget, which, along with Chernobyl and Afghanistan finally put their whole economy over the brink.

    When the Soviet Union fell apart, it freed up most of their satellites (remember, even Russia is a satellite of the former Soviet Union) and also pseudo-satellites like India so that they could develop stronger economic relationships with the West.

    It’s as if a real giant physical curtain that had separated two worlds had been lifted. Suddenly the residents of both worlds observe each other for the first time. They have mostly the same wishes and wants economically, but there’s one big difference. In the East, their economies had not developed to the level that their “currency of exchange” was valued as highly as that currency was in the industrialized West.

    No… I don’t mean money currency…. I mean the REAL currency, which is the price of LABOR; W-A-G-E-S

    [labor is in all cases the core execution of the abstract concept that money is]

    …and in the East labor is a b-o-t-t-o-m-l-e-s-s pit of deflationary productivity (in terms of wages) that’s just getting started good and will probably take another generation to reach equilibrium with the West.

    As a result of that, the Federal Reserve has no choice but to provide accomodation, because the U.S. has no new proprietary growth engine that will fill the void while wages in the West ratchet down to also find equilibrium. Remember, the Fed is charged with two responsibilities, each of which the Congress will chew on them about if they fail to deliver; they can not simply enforce strict monetary responsibility, even if they think it best… because there are times they must sacrifice those efforts in order to attempt to fulfil their other responsibility… not to growth which is often the quote… but to employment, which is not always the same thing, and in some cases may even stunt the healthy growth an economy needs.

    Attempts at monetary accommodation by central banks in the West is what ran the housing market up… and may yet keep it up. Low wages are built into the record earnings growth of U.S. corporations, and that has attracted world-wide financial assets… but the flow of investment capital is not to U.S. domiciled industry, but rather is from the U.S. and the industrialized West to the Third World, and it’s not going to change very quickly.

  18. cm commented on Oct 15

    Blissex: Good analysis as always, but imputing racism and authoritarism on people of means strikes me as over the top and unwarranted.

  19. whipsaw commented on Oct 15

    per cm:
    “Blissex: Good analysis as always, but imputing racism and authoritarism on people of means strikes me as over the top and unwarranted.”

    I don’t think that it is reasonable to tag everyone of means within that way, but I thnk that Blissex is 75% correct in doing so. Between our incomes and The Miracle of Inheritance, most people would say that my wife and I are in the upper 5%, yet I find that I am quite estranged from most others in that bracket because I happen to be a “liberal” who doesn’t see everything in terms of “good for me” = “good for everybody.”

    Where the US got ahead of everyone else was in building up a strong, educated middle class after WWII. Now we have some people running the show who are committed to destroying that class because they think that they can net more by using coolie labor 10,000 miles away to either make things or program things. That is going to come to a head sooner or later and it won’t be pretty.

  20. Eclectic commented on Oct 15

    “Where the US got ahead of everyone else was in building up a strong, educated middle class after WWII.”

    Three points:

    –We in the U.S. were fortunate (this is not a value judgment) because it’s much easier to compete when you have the only industrial base that wasn’t either severely damaged or entirely destroyed after WWII.

    –Our educational system very efficiently delivered exactly what it needed to deliver and at exactly the right time… a vocationally educated workforce. Think of post-WWII American industry as having a scale of educational employment skills in which they reached “down” to some minimum level for full employment. Then think of our public educational system as producing an average educated worker with a skill set that reached “upward.”

    The most fortunate outcome for us all was that the great bulk of American industrial needs was more than met by the overlap of vocationally educated workers and the skill set requirements of industry.

    Unfortunately today, even if we were to agree that the educational system is producing the same quality worker, the skill set that industry reaches “down” with doesn’t reach so far downward as it did until just a few years ago… and even when it does, it reaches with less wages and benefits.

    –Freedom of both the body and the mind are two powerful inducements for marginal improvements in human p-r-o-d-u-c-t-i-v-i-t-y.

    And, productivity reduces costs… reduced costs improve the standard of living of a society.

  21. cm commented on Oct 15

    whipsaw: I’m not objecting to the statistics, just the principle of blanket statistically- or anecdotally-motivated stereotypical judgement.

    The fact, or contention, that some property is true of some majority, or even substantial minority, of a somehow described group does not warrant advance judgement of individuals ascribed to that group.

    That said, I want to point out that my objection is not motivated by feeling offended in this particular matter. I consider myself a working stiff, but I don’t like the principle of summarily judging people who probably just managed to strike it lucky.

  22. Sovereign John commented on Oct 15

    What fluff. If everyone was a millionaire the price of everything would be a million dollars. The only way Capitalist can survive is if the rest of us are in poverty.

    unlike E=mc2

    Dilberts’s 2+2=5 isn’t worth the paper its written on, come to think of it, its just like a FRN.

  23. whipsaw commented on Oct 16

    My points are that most people of means could give a shit about anyone else (unless they are so rich that guilt kicks in) and that the American Engine is the middle class and it has been deliberately destroyed since 1981 when Ronnie Raygun was sworn in and class warfare began in earnest. At the present, the only thngs that we do better than anyone else is blow stuff up and spend beyond our means. Per the Plan.

    I’m not rich by any standard, but I get by okay and could manage as needed pretty much regardless of what happens. I really do wonder about people who are not in that position and are being pushed further away from it by a system that is devoted to debt? What are these punk MBA’s going to do when they realize that they have a $550,000 loan on a house that suddenly appraises for $475,000?

    A truly strong economy is not asset (inflation) based, it is production based and ours has been sold out. Regardless of what may trade on Wall Street, we have entered into an era of hard dicks and bubblegum (to borrow a Vietnam era phrase which equates to endless frustration).

  24. thorninpaw commented on Oct 16

    Dilbert’s Unified Theory of Everything Financial

    The Big Picture Thanks to Paul Farrell, we learn that “Quietly hidden in Adams’ groundbreaking work is a financial formula so simple it rivals Einstein’s E=mc2. In its original form Adams’ formula was apparently so heretical and so explosive…

  25. Gregory Bloom commented on Oct 16

    “If everyone was a millionaire the price of everything would be a million dollars. The only way Capitalist can survive is if the rest of us are in poverty.”

    Uh, no. If everyone creates (more than) a million dollars of wealth in the economy, for which they have been paid, then we will each be awash in a million dollars worth of goods and services which we can afford. In a capitalist system, one more-or-less receives cash in exchange for wealth one creates. Wealth isn’t a zero-sum commodity. It is created by each participant in the economy. So the notion that one person can only become wealthy at the expense of another is an ignorant socialist fairytale.

  26. T commented on Oct 16

    Rule number 8 should be called the Lake Wobegon rule. Everyone thinks they’re going to do better than the market, but the truth is definitely that on average you’d be better off not attempting market timing, given that the reduced fee expenses are 100% probability money. It’s very hard to argue that an average individual, not in the financial industry, should attempt to achieve positive alpha when so many professionals fail to do so with much greater resources. Attempting to market time, pick stock,s, etc is not a good idea for a typical retail investor saving for retirement; keeping in mind that increasing your investment rate during a bubble is as much market timing as withdrawing investments at other times.

  27. bloppo commented on Oct 16

    That chimpanzee in the Ontario zoo has outperformed the pundits when it comes to picking profitable stocks for many moons.

    Eeeek Eeeeek

  28. Medical Advice from a Walgreens Cashier commented on Oct 16

    I think Dilbert is great humor. Obviously Scott Adams should stick to humor and not financial advice…just like I shouldn’t be writing a comic strip.

    Key misses:
    * #9 – holy cow… “hire a fee-based financial planner, not one who charges a percentage of your portfolio”. That IS a fee-based planner. A FEE-ONLY planner charges for advice. A commissioned planner charges for the transaction. And ALL 3 compensation types can be appropriate (read: cheapest) for a particular market, and contrary to the media, compensation doesn’t drive ethics of most people. A schmuck is a schmuck regardless of how they get paid, and an ethical advisor is ethical regardless of compensation method.

    * what happens if you’re too sick or injured to ever work again? if you don’t think it can happen to you, check out the statistics (www.halfapaycheck.com).

    * what happens if you have a long-term care need…not just YOU, but anyone who could financially depend on YOU (I’m talking to you baby boomers). The stats on the draining of baby boomer savings to pay for parent’s medical care is alarming.

    * #1 (the will) ignores the need for medical directives, powers of attorney, and many other legal docs that today’s society requires. Don’t think you need them…go talk to an E.R. doc.

    * Adams has consumed from the media’s “buy only term” well, which is a fool’s mirage. Anyone who speaks in absolutes on life insurance or annuities (all good or all bad) is undereducated on how they can work to your advantage.

    * His taxable brokerage account is getting drained every year from Uncle Sam, is fair game to any creditor or litigious party, and cannot be rebalanced without taxation. Pity he didn’t mention Roth IRAs, municipal bonds, annuities, etc. that can provide all of those things for less than you think.

    Scott, please stick to humor – you’re good at it. Leave the advice for those with some skin in the game.

  29. bcl commented on Oct 16

    So if the average person wants to put away their money into something that is safe (doesnt require timing and pullout before a drop) and wants to exceed inflation pacinng, what options are there? Which steps are preferred?

    These are the kind of answers people reallly need to know. Instead we have people buying 22″ rims or blowing their loads in risky investments they reallly dont fully understand.

  30. Karen Setnor commented on Oct 16

    My only change to this list is to put the 6 month’s expenses into a CD, not a Money Market account. CD pays about 5 times more (MM’s don’t even break even with inflation) and the penalty for early withdrawl is only a few month’s worth of interest. (If you have a genuine emergency – huge hospital bill, job loss, etc. – that forces you to dip in, 3 month’s interest lost should be the last thing on your mind.)

  31. me commented on Oct 16

    “CD pays about 5 times more (MM’s don’t even break even with inflation)”.

    Wrong. Online banks such as eloan or gmac bank offer money market savings accounts, FDIC insured, which pay more than most cd’s. As of now, 5.25% or so. Withdraw any time you want, no penalty. They can offer such high rates because they have no bank branches, and so aren’t paying millions of dollars for all those buildings and bank tellers and vaults and parking lots and such.

  32. bc commented on Oct 16

    Sounds great.

    Then what do I use to buy groceries, genius?

  33. redherkey commented on Oct 16

    Excellent, simple and pragmatic advice. I wanted to pass along two clarifications to the advice:

    IRA: Whether you need a Roth IRA (tax paid now, none paid when you take it out later), or a traditional IRA (tax not paid now, paid when you take it out) depends on a lot of factor. For most young people, they’re in a low tax bracket so it really is worth paying tax now, rather than later in life. *PLEASE* max your IRA out regardless – social security in any reliable, usable form will not be there for you if you’re under 45. The IOU Congress signed when they took the money has your name on it to repay it – so repay yourself via IRA right now.


    Index Funds: Specifically, you want an exchange traded fund (ETF) that you can buy without paying significant management fees. Go to finance.yahoo.com/etf and look at the Vanguard family (I do lots of iShares and some Vanguard but I’m a finance professional). Very low expenses. Stick with something very basic at first – like VTI and VO. As you learn, add a little emerging market exposure like VWO and some defensive sectors like consumer staples – but not very much. Get some advice! If you’re under 35, long-term demographics (like baby boomers retiring) will be a real problem for your investments, so start investing now with like a sharebuilder.com Roth IRA account in VTI, VO and VWO, and the get some professional advice.


  34. underwood commented on Oct 17

    I can agree with Blissex on one thing. If you have the desire and the discipline to follow through on those first 9 points, why not quit the pity party and earn a lot of money. How did Gregory Bloom put it, “create wealth.” You don’t have to steal it from the poor. You don’t need a gift, you don’t need to be free from expenses, and while reality is a bitch, you can recover from disaster. And please don’t assume it is “not difficult” for Dilbert to earn or save just because he happens to actually do it.

    You seem quite convinced that a different set of rules applies to the rich than to the rest. You seem quite convinced anyone else’s success is your loss. I am sorry, you have bought the most inconvenient lies.

    On a better note, I would add a #11. Buy American. US policies towards controlling business risk have facilitated the economic growth that translates into personal wealth: rule of law, incorporation, antitrust, bankruptcy, deposit insurance, etc. BUT US policies have failed to anticipate or control the many micro and macro risks of opportunistic globalization. Why invest in American markets and then buy from everyone else? The solution must be a combination of policy change and voluntary loyalty to sound, ethical, and loyal producers and employers.

  35. PerfectlyBlemished commented on Oct 17

    Uh, hello… Dilbert is a cartoon. Read by people who typically spend a third of their meager existence in a cubicle.

  36. john commented on Oct 17

    yeah 401k, tell that to the former employees of enron

  37. Silent Investor commented on Oct 17

    I’ve heard to only max out a 401k up to the employer match, then IRA, the taxable accounts. Any thoughts?

  38. trav commented on Oct 17

    John, Enron employee’s didn’t loose their money because of a 401k. They lost money because all of their holdings were of enron stock (whether or not it was in a 401k). That is why you diversify. Index funds, etc. Putting all of your money in one place is not a good idea, especially if that money is critical to you. If your companies 401k structure only allows you to put your money in the companies stock, or their match is in the form of company stock, then that is not a 401k to max. Most all 401k’s that I’ve seen have several fund options to choose usually including a few index funds. These are not affected by the company. If you have a 401k that offers index funds and the match can be used on the index funds, then yes, this is a good place to put your money (you make a 100% return the first year with the employer match alone).

    Adams plan is a great plan for probably 85% of the people out there. Is it perfect for everyone? Of course not. If you are a very disciplined spender and investor there are other options, but very few people are disciplined enough or consider the extra work worth it (time and energy has value also). Overall, it is a great plan for Americans. Unfortunately, most people would rather have their nice cars and big screen TV now than actually live comfortably but modestly and have a nice retirement.

  39. Jules commented on Oct 17

    I don’t get what’s supposed to be so great about index funds. Why should I pay a fund management fee on a fund that effectively has no management decisions to make? Why not just buy the stocks in the index individually?

  40. ravir commented on Oct 17

    trav: Index funds have extremely low management fees (compared to ‘managed’, or non-index, funds). I don’t know the figures exactly, but it’s something like .01% on average for an index fund versus 1.5% on managed funds. The funds still have expenses, but what you are paying for is the overhead of diversification. Remember, these management fees include brokerage fees to buy and sell securities (the fund constantly needs to be rebalanced), computers to keep track of everything, etc. Yes, you could do this all on your own (if you had the time and desire to), but if you’re like most of us you won’t have the wealth to be able to do all that. (Another advantage of a mutual fund: economies of scale.)

    The advantage of a mutual fund is diversification. The stock market average has consistently beaten all other averages (bonds, real estate, gold bullion, etc.). Index funds strive to deliver the stock market average — nothing more, nothing less. Too often, managed funds do much worse than the overall market.

    Adams’ ideas are simplistic, but (as was pointed out earlier) they work for MOST cases. Sure, if you or one of your dependents gets seriously ill, or if you lose your job, you will have a difficult time succeeding using this plan — but then you would have a difficult time succeeding using ANY plan.

    Unlike Leisa, my family income is within a percentage point or two of the median family income for an American family. I am 48 years old and expecting to retire within a very few years. The secret? Live within your means and invest regularly. Your investments don’t have to be spectacular — if you will sock money aside in tax-sheltered plans (401(k)s, IRA’s, etc.) invested in plain old index funds, odds are you will be able to retire comfortably — and early.

    What irks me is people I work with (in the same or even much higher income bracket) who complain about their high credit card debt and who never set anything aside for retirement. I’m afraid these are the people who — when THEY are ready to get out of the work force — will be voting to tax the ‘rich’ (i.e., those of us who have been saving for retirement) to support them.

  41. trav commented on Oct 19

    ravir, I think you meant to point your comments at Jules not me. I’m all for Index funds.

    Jules, a lot of 401k’s don’t have a true stock purchasing option. Also, the fee for a good index fund is usually a lot less than the cost of keeping a LARGE balanced stock portfolio (don’t forget to include a cost value for your time). If you keep a fairly small yet diverse stock portfolio and you are disciplined enough to hold onto the stocks for a long time, then yes, it would be cheaper than an index fund. But you are relying on a less diverse portfolio than an index fund (if you start buying 30 plus stocks, your trading cost will be large). Also, index funds are much cheaper to get into initially. You can be diversified with very little money. It would be hard to diversify in stocks if you are only investing an intitial $1000. If you have already built up quite a bit of wealth, then yes, it may be time to look at some other options.

    Ravir, I completely agree on living within your means. Unfortunetaly, that is where the modern American is not doing so hot.

  42. Jackgoldman commented on Nov 29

    Currency debasement friends. It’s all currency debasement. You put in a dollar in 1971. You get back ten dollars in 2006. It buys the same exact stuff one dollar did in 1971. In real silver money, pre 1964, the Dow is at 1500. Wake up and smell the currency debasment coffee. Half of something is better than all of nothing but you lose 50% when you work and lose 7% a year to currency debasement. Funny all investments “average” 7%? It’s no gain at all. You must get ahead, not break even. Think currency debasement and you will understand investing.

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