Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Rock Fish who wrote (3661)	2/26/1998 2:19:00 AM
From: sea_biscuit	Read Replies (1) \| Respond to of 42834

The 4% rule, as far as I know, is based on cost, not on market value. So, if one of your investments does so well in comparison to the rest of the portfolio that it becomes, for instance, 15% of your portfolio, then it is OK. Also, I have heard Brinker say at least on one occasion that if the stock is from the company you work for, perhaps a higher percentage than 4% might be OK too. Not too high, but something like, say, 15% or so. Brinker cited the advantage of "better visibility" of the company's prospects as one of the reasons why the investor might wish to go beyond the recommended 4% in that case. Dipy.

To: Rock Fish who wrote (3661)	2/26/1998 2:47:00 PM
From: Boca_PETE	Read Replies (1) \| Respond to of 42834

RockF: re:<You have to know when and when not to ignore the 4% rule> Your point hits the nail right on the head. Employees of Microsoft and other similar fast growing tech and non-tech companies with a future you can bank on would want to ignore the 4% rule for company stock or options they get during the course of their employment. On the other hand, employees of rust belt manufacturing concerns and oil companies whose stock price closely correlates with the volatile price of crude oil would want to move toward complying with the 4% rule. Last April, I got the chance to diversify 25% of my shares in my employer. My employer's shares were only up 12% for 1997. The VANGUARD PrimeCap shares I transferred into last April 1 were up over 40% during 1997 from that date. Wow, what a difference to my 401K plan ! The prospects for the company you work for are key. P

To: Rock Fish who wrote (3661)	2/28/1998 4:59:00 PM
From: sea_biscuit	Read Replies (1) \| Respond to of 42834

I guess we owe it to ourselves to get the other side of the "4% story" too... A friend of mine had options to buy about 10,000 shares in COMS at an average price of 20. He could have bought (and sold) all of it towards the end of 1997, when it was at 80 or thereabouts. At that time, he bought a home for about $350K and financed it at 7% or so. However, he didn't put anything down on the house. As for the stock, he thought he will just let it ride. Then, of course, the stock plummeted to 20! My friend began lamenting that even if he had sold only half of his stocks and paid the taxman 40% of his gains, he could still have put 50% down on the house. (And to rub salt on his wounds, somebody asked him to imagine what that would have done to his monthly mortgage payments!) Well, even if he had gotten into the "no-brainer" Total Stock Market Index, he would have been UP 30% since. As I see it, there cannot be a better argument for the 4% rule than this real-life illustration. Dipy.