Ms. Harrop, in a superb piece, “Middle Class Aided Its Own Decline,” argues that the old middle-class behavior is what gave the U.S. its strength.
Here is an excerpt [emphasis added]:
Frugality used to be a central middle-class theme.
What happened to it? We now read the stories of middle-class families in free fall because they lost a job and had no savings. Back in the mists of time, there was a rule about setting aside six months of salary to cover a possible job loss. Not only did the middle class stop saving, but it famously borrowed to maintain extravagant living beyond what its stagnating salaries could support. Middle-class Americans used to throw “mortgage burning parties,” when, after 30 years, they finally paid off their home loans.
They understood as long as they had a mortgage, they were not full homeowners.
After you get your savings plan in place, you can start a nest egg portfolio, and just sit back and let the dividends roll in. Of course, you’ll track the shares and the industries they are in daily, but you won’t trade daily, or even weekly or monthly.
This will keep your expenses and your capital gains down to manageable levels. You’ll only sell shares in one of your companies if you see a change you don’t like.
Sure, you can trying doing options and hedges and other more arcane things, but you’ll be keeping a very close eye on them, or you won’t buy them at all, will you?
In our next post, we’ll cover ways to deal with insurance and real estate, and then how to pick your stocks.