# Retirement Saving is Not Gambling

September 24th, 2009 by
PK

Some years back my cousin planned a trip to fly out and visit me while I was at the University of Southern California.  I lined up two of my friends to greet him at Los Angeles International Airport... and immediately drive to Las Vegas.  The trip is around 3 hours... and he was going to school in Boston, so the flight was 6 hours on top of that.  With plans in place, I waited for him to show up.

My cousin went out the night before his plane flight.  He stayed out late too... in fact, when he got back his flight was only in a few hours.  Of course, he slept through his alarm.  To this day he claims that he woke up as his flight was flying over (he lived close enough to Logan to hear flights which took off over the city).  He found some other flights which would get him to LA... 12 hours later.

One of my friends dropped out, but my roommate stayed strong.  We picked him up on time and started the trek to Vegas.  As many of you know, it's generally a 4 hour trip.  What we hadn't planned on was Daylight Savings Time messing up our plans further... adding a virtual hour to our trip.  Now I'm not Tucker Max, (but if you want to read about him, read my friend's interview of him) but it was an epic night which we finished by eating breakfast (for free) before retiring to our (comped) room, sleeping an hour and a half, and going back to L.A.

Where Are You Going With This?

Other than back to L.A.?  My story is, I like to think, an example of living for the moment.  However, the caution to the wind attitude my friends and I displayed

Not the Right Attitude... (Adrian Sampson)

has lessons for people hoping to retire someday... don't do anything like we did.

Case in point: a stock I mentioned in a recent article, AIG AIG.  In the last year, AIG was backstopped by the State of New York to the tune of $20 billion. When that backstop wasn't enough, the feds rode to the rescue with$85 billion in credit.  Soon, that number became $165 billion -$1,400 from every family in the United States.  The Government now claims 80% of the equity in the company.  This leaves 20% to common investors.

AIG has become a daytrading stock, much like the stock of internet companies in the 1990s.  Yet, enticed by the huge price swings in the common stock of AIG, some individual investors are dipping their toes into trading the stock.  Its 52 week stock price has traded between 6.60... and 114...  As of Wednesday night, it closed at 46.71.  Many of my friends have asked me about it... they know someone who made money on AIG, and they want to know if they should take a shot too.  A few even hopped into the mayhem.  My response?  No... the stock has become unglued from all fundamentals.  Yes, it may even be worthless.  Let it play out, and maybe in a few years it'll be worth it.  In my mind, I'm not touching General Motor's holding company (ticker: GMGMQ) or Lehman Brothers, or Washington Mutual either.  Hell, I'm avoinding Citi C.

Retirement saving is a marathon, not a sprint.  Any stock you are going to hold for a while you should fully vet and understand the fundamentals.  Sure, humans have a gambling bias.  That's not a reason to invest large sums of money you are going to need for a long time in retirement... or even in the intermediate term, like your kid's schooling and braces.  The best advice I have heard (and will now put in print) is to take a pittance... something like 5-10% of the money you can afford to lose, and go wild with whatever investments you want.  This will hopefully satiate your inner speculator, and protect the majority of your nest egg.

Talk to me... what have you learned about saving?

### Don't Quit Your Day Job...

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