A Few Practical Observations On Investing At 72

As the ripe old age of 72 approaches, I decided to look at the life expectancy tables (also ominously called “mortality tables”).  I found we have either 12.4 or 13 years to live on average, depending on whose table you use.  Being Yalies, however, like Lake Wobegoners, we are all above average, right?

I then looked at the article from September, Class Survey: 3. Work, Career, Net Worth, and discovered that we ‘69ers have a median net worth of $3.7 million  Of that figure, almost certainly some of it is invested in mutual funds, ETF’s, stocks, bonds and alternatives.

Some thoughts, then, about investing at 72:

1. 1. Don’t Lose!   You’ve made it, now keep it.
   2. Long-term?  Sort of.  Yes, given a 13-year time horizon you can still be a long term investor. But gradually start to weight your overall asset allocation to less volatile sectors.  There have been only two periods in which an investor in the S&P 500 has lost money over a rolling ten year period.   The odds would appear to be on your side especially when you consider that since our graduation the index has averaged an impressive 10.2% total annual return.But when you consider today’s rather lofty valuations nearing the end (?) of a 10-year bull market, caution is advised.  Yale’s Prof. Shiller, using his own methodology, would predict very modest or slightly negative returns over the next 10 years.
   3. Stay Liquid.  It is too late to invest now in LBO’s, real estate pools, private equity and the like. The last of your payouts and winding down of the investment may be 7 or 10 years down the road, and to invest in these asset classes wisely requires committing to a number of vintage years.
   4. Get Liquid.  If, say, you are fortunate enough to own 2 or 3 residences, think about slimming down to 1.  Your executor (and heirs) will thank you, and you won’t have the carrying costs.  Same for other illiquid assets.
   5. Resist the urge to trade. That guy at the cocktail party who had a 4 bagger in 10 months?  Funny how he never tells you about his losers.  If you must trade, keep it to less than 5% of your liquid net worth.  If you are such a great trader, you must be entering your orders from your yacht, as we (in wealth management) used to say.  Are you?
   6. Simplify, Simplify.  Emerson had it right (“Our life is frittered away by detail…simplify, simplify.“) — although he could have shortened his famous advice to just “simplify,” don’t you think?  Anyway, you should think about beginning to simplify and liquefy.

Review your asset allocation with the idea of becoming more conservative.   Live to 95, still enjoying your wealth.  Be above average!