Personal Finance

It's so far been quite easy. Financial gurus always say: "to make enough money into retirement you need to invest large part of your money in stock because the yield is much better than any other alternative investment". Easy, huh? The science of economics says that over the time stock investing risks subside, in other words, the longer you invest, the lower risk of loss. Some pundits lately, however seem to contradict this view. Take Zhi Bodie, for instance. this Boston University professor claims that investing in stocks is always risyk, regardless of the investment horizon and retirement moeny should be invested elsewhere.

It is often said that the main purpose of investing in equities is to combat inflation risk. In fact, evidence shows that in times of high inflation, stocks on average performed badly. This leads us to the conclusion that when inflation is high, money should be invested in treasury bonds. The problem is that if we assume 2% yield after inflation, it's too little in the retirement to make a living. However, these calculations assume that you will only put aside ca 10% of your income. What if you put aside 20%? that makes things much easier, doesn't it?