Received Jim Cramer’s Real Money for Christmas. As viewers of his CNBC show Mad Money know, Cramer likes to divide investing money into two pools, one for retirement, one for speculation or “mad money.”
I do the same. The retirement money, I manage conservatively with the help of a financial advisor. The mad money or my fun portfolio, I fly solo with, speculating on higher risk investments.
Cramer has an age specific slant on retirement money (and rightly so). The twenties should be spent accumulating high growth equities (can be done in mutual funds) with some speculation. The thirties see a pull back in speculation to dividend paying stocks. Bonds are added in the forties. If retiring at sixty is the goal, more than half the retirement funds should be in fixed income. More shifting to fixed income in the fifties until it dominates the portfolio in the sixties.
A dividend lover myself (at age 35), I can’t fault the allocation. If anything, I’m lighter on the speculation (didn’t speculate much in my 20’s). The retirement funds, I don’t mess with, even hiring a financial advisor to prevent me from doing something dumb (like throwing it all into Apple stock). Why would I mess with it? This is the portfolio that will keep food on the table and a roof over my head.
Now my fun portfolio is a whole other story. This is the chunk of money that will make me rich (that’s the plan, anyway). This is the chunk of money some of the tips in Real Money will help me grow aggressively.
Comments (3)
Kimber,
I pinged you on this here: http://www.legacydad.com/2007/01/will_it_last.html
My only complaint with Cramer’s advice is that those of us who retire in are 40’s or 50’s will need this money for the next 30-40 years. Will fixed income investments continue to grow as we start to withdrawal funds? Will our nest egg last because of our early retirement? Will inflation eat away the fixed income over time?
Posted by Lance | January 9, 2007 1:39 PM
Posted on January 9, 2007 13:39
I've always thought that keeping some investment money aside for the riskier and potentially more rewarding deals separate from retirement money is a great idea. Unfortunately so far I've only been able to set aside a limited amount for a regular account let alone a high risk fun fund.
Posted by Matt | January 10, 2007 7:02 PM
Posted on January 10, 2007 19:02
Lance,
I'm at the CES right now in Vegas with limited internet access. Going to check out your link definitely when I return.
Matt,
Be patient (I know, it's difficult). Investment funds will accumulate over time.
Posted by Kimber | January 10, 2007 8:31 PM
Posted on January 10, 2007 20:31