Ghost of Bisbee said:
Proposition Joe said:
Pretty much this... It was mentioned on an earlier page of this thread I believe... But if you are in your 40's/50's sitting on $10M and the market drops 50% over a few years, that alters your way of life pretty significantly.
But if that $10M jumps 50% over a few years to $15M... There's a decent chance your way of life isn't actually improved that much.
It's not about having the biggest number, it's about improving your quality of life. Those two things don't go up or down at the same rate.
Can you elaborate?
I view it like this. If you're 40 and have $10M net worth, you're set. You've accumulated enough money that reasonably you don't have to do a thing. Sure, there's always a higher class airline seat or more luxury vacations to take, but $10M with conservative investing at that age means you and your wife can retire in a nice million dollar house with plenty of room, have kids schooling (through college) paid for, take nice vacations and still have plenty of money left over to do just about anything a reasonable person could want to do.
If you aggressively invest that and it jumps to $15M, that's not going to change any of the above. You'll have more money, but you'll ultimately need to seek out things to spend it on. Not a bad problem to have, but the flip side...
If you aggressively invest that and it dips to $5M... Now you're still fine, don't get me wrong, but once you factor in house, kids education, vacations, etc... then the draw on that doesn't necessarily get you immediate retirement. The "game" so to speak isn't going to be that hard for you to finish out, but you're not done.
In short - more money is great, but after a certain age/wealth (in this example 40/$10M), the upside benefit of even moderately aggressive investing doesn't overcome the downside risk.
