They Were Informed

About four years ago I told my nephew, who was about 29 at the time, the following: open a Roth IRA; contribute $5,500 the first year; contribute $5,500 the second year; that is all the money that you will ever have to save for the rest of your life; invest precisely the way I tell you to; and, by the time you are 72, your Roth IRA will be valued at approximately $2.44 billion with probability 0.85.

I do not have $5,500 for each of two years, said he.

I will give you the $5,500, said I.

He did not take me up on the offer: seems that his interests lay elsewhere.

I said the same to my niece at about the same time. She was about 28 at the time.

I do not have the $5,500, said she.

I will give you the $5,500, said I.

How can you guarantee that it will work, said she.

No guarantee, but merely probabilities, said I.

What about the other 0.15 probability, said she.

In that case, you will have somewhat less, said I.

She did not believe anything that I said.

Actually, with a relatively simplistic hedge, the efficiency can be increased three fold. Since the efficiency is the natural logarithm of the change in the underlying yield ratio, then a three-fold increase in efficiency represents a mere 2.5 percentage points increase in the annual yield ratio of the investment strategy over a 43 year investment horizon.

No one believes that this can be done.

But I am doing it.

Nathan A. Busch

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2 Responses to “They Were Informed”

  1. Steve Bennett Says:

    Well Nathan Share your expertise here please[.] [It m]ight be interesting to see … [in what] you are investing[.]

    Steve Bennett

    • Mr. Bennett:

      Thank you for your comment. Please take notice that I edited your comment for clarity.

      It appears that your assumption is that my plan was to instruct as to individual stocks for my niece and nephew. Whilst a reasonable assumption, it was incorrect. Of course, I am selecting stocks for my own portfolio. However, it is my intent to give my niece and nephew the tools that they need to make sound investment decisions on their own.

      Please recall that I recognized that my niece and nephew now have approximately 65 to 70 years long time horizon and about 40 years, or so, of that will comprise a meaningful work life. Given that type of a time horizon, the first steps of my approach is to “rewire” their brains differently so as to understand the greatest force in the universe: compound interest. As part of that “rewiring”, my approach seeks to teach that everything that is thought to be impossible is already being done: except, of course, create a process that is negentropic. Also, the “rewiring” is comprised of removing all fear from their minds. If the students learn well, within a short time they will no longer need me. Rather, they will be able to make sound life, financial, and investment decisions on their own.

      Without him knowing it, I have already set my nephew on the first step: Napolean Hill, “Think and Grow Rich”.

      I hope that this helps.

      Nathan A. Busch

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