This topic is one some people might want to avoid: the unpleasant possibility that a retired investor could someday run out of money.

Just about every day somebody asks me what I think the market is going to do for the rest of the year, or over the next quarter – or even the next week. I’m not qualified to make that kind of prediction and I don’t think it’s very useful. But I am often asked a more interesting and useful question: "What is a reasonable rate of return that I can expect on my investments over a long period of time?"

The topic is timely this year, when many investors are facing disappointments. Many investors became so excited about technology stocks last winter that they borrowed money from brokers (using margin accounts) or credit cards to buy aggressive stocks and funds. Many of those people have to be mighty disappointed about now.

Every retired investor I’ve ever talked to has experienced moments of doubt about the future. Will I last longer than my money? Will I be OK even if inflation heats up and the market cools down?

From the February 2000 issue of the Alaska Airlines Magazine.
Worrying about investments is very low on the list of things people want to do when they retire. Ideally, retirees should be able to meet their income needs without eroding their principal, and that principal should have an opportunity to grow, at least in the good years. For some time I have been mildly obsessed with finding the very best combination of assets to achieve those results for retired investors. And I’ve found a combination that’s pretty hard to beat. From 1970 through 1999, it provided a compound return of more than 12 percent, at less than half the risk of the Standard & Poor's 500 Index.

Last fall, more than 300 professional investment managers were asked to vote for the top 10 money managers of the 20^th century. Warren Buffett was first on the list, named by 86.4 percent of the respondents.

EDITOR'S NOTE:

At the start of 2000, millions of investors acted as if they believed that the old rules of investing had been repealed, that making money had become easy. Without knowing it, they were rushing toward a major bear market. In this article from early that year, Paul Merriman gave investors some unwanted advice that is just as valuable in 2010 as it was a decade earlier.
 
 
The day after Christmas, the Washington Post proclaimed "a sea change in the investing culture of America" as day trading (a clever euphemism for gambling) is regarded as a profession and money-losing companies are revered while profitable enterprises are scorned.

After a spectacular first quarter, the U.S. stock market sputtered and gasped a bit over the past few months. But many people still seem to believe that U.S. stocks are all they need to create a secure and prosperous future.