More on Risk: Response to James (2)

[Andre Dermant <adseale@aol.com>]

James says:

"Then present your own scenario. Tell us what instruments people
should invest in at what times of their lives. Then maybe we can
get somebody to plug it in and show not only the cohort risk in
your scheme but also how that risk management affects returns
overall".

Once we accept the idea that there are many ways to minimize risk,
then it is possible to design investments plans to meet the needs
of people of various ages:

     1) diversify by investing in S&P 500 indexed mutual funds (or
        Wilshire 5000);
     2) reduce cost of administration in the same way;
     3) balance the stock investments with bond mutual funds using
        percentages depending on age:
	   percent in stocks = 100 - age.
     4)report regularly on investment results to each worker using
        internet;
     5)most important, give workers a choice: stay on existing
        system, move to partial privatization (2% of FICA taxes) or
        full privatization with an additional 5% FICA taxes.