5% of my salary (matched by my employer) goes into a 401(k). Originally, it was pretty much half going into a stock-based fund, and the other hand into a fixed fund that has slowly been dropping in yield over the years (in 1990, it was about 5%; today, it’s about 2%), but as I’m close to retirement now, I equalized the existing amounts and changed future deposits to 1/3 stock and 2/3 fixed so a market “correction” just before I retire won’t affect me that much. Also, every time I have $10,000 or so lying around in my savings account, I invest it in tax-free mutual funds.
I also “invest” in the big time entertainment industry - usually on the pass line or at a video poker machine. Dividends are not as high as I had hoped.
I guess it comes down to what you mean by risk. Risk of being forced to subsist on cat food? The way I see it, I have minimal risk, so I can afford to take an approach where I have the best chance of making my portfolio grow instead of shrink. The risk of not growing with the market is a risk, too.
Wouldn’t that only “catapult” your capital gain taxes from the 15% bracket into the 20% bracket? I know people can be very tax-averse, but if you’re worried about exposure to too much market fluctuation because your Google and Apple positions are too heavy, then an extra 5% on the gain would (to me) seem worth it.
One of the interesting things about personal finance is the absence of any conclusive logic why people with more or less money should be more of less risk averse in their investments. It really is a matter of personal preference hard to define any further than that. That’s one reason ‘modern quantitative finance’ almost always tries to find principals, equations etc where personal risk tolerance, or how it ‘should’ vary by wealth level, can be factored out or ignored.
One person can reason they have barely ‘enough’ so cannot afford any investment risk. Another with barely enough can reason it’s all the more reason to take risk to (likely) get to a situation where reach their actual goal, beyond barely enough. Some people way beyond enough reason there’s no point in taking any more risk. Others, as just responded to you, then tend to think of it as the ‘enough’ part on which no more risk should be taken, but the amount in excess of that is ‘house money’. There’s no general proof that any of those four reasonings make more sense than the others.
Also practically, a lot of better off people are older, have heirs in mind, so their investment horizon for the ‘more than enough’ portion is their heirs’ lifespans not theirs. And it is generally accepted one would invest in more risky assets (like stocks) with more time to recover from their periodic setbacks.
Also on horizon, as was mentioned if somebody has only a few $k, that’s not even enough for a short term reserve against sudden bills, some months of joblessness etc. The reason people should not be investing the first few $10’s of k they save in the stock market (aside from tax advantaged and especially employer matched defined contribution plans) is that they could need that money right away. It’s not directly the fact that they don’t have much money. Once they have the 6 months, 1 yr etc living expenses set aide in safe investments, they could reasonably invest in stocks though their total net worth is still relatively small.
There’s also the AMT, which hit me pretty hard in 2017 and 2015. The AMT calculations are opaque, but I think without the capital gains I reported, I would not have had that.
That reminds me. Percentage-wise, the best investments both my father and step-father made was collecting silver dimes and quarters just before and after they were mixed with copper. Neither of them had large collections of silver dimes and quarters, but the increase was notable.