Rules of thumb aren’t perfect, of course. But that’s their advantage. By starting with a strategy you know isn’t perfect, you naturally leave yourself room for error, and are more flexible in accepting the market’s whims.
So I don’t use fancy valuation models to calculate how much stocks should return over the next 10 years. I assume 6% a year after inflation over the long haul. I figure that’s good enough.
I don’t forecast what the market will do this year. I assume the market will go down half of all days, a third of all years, and a fifth of all decades. That’s probably good enough.
I don’t predict what the economy will do this year. I assume we’ll have a recession every five to seven years. Good enough.
Don’t bother me with calculators that show me how much money I’ll have in 30 years. I don’t know what my bills will be next month. I save as much money as I reasonably can while living a lifestyle that I’m content with. I figure that’s good enough.
Spare me with your analysis of why I should own stocks from some country because of economic trends. I’m diversified, and accept part of my portfolio will always be doing worse than others. I figure that’s good enough. –from Motley Fool
