Tuesday, November 5, 1996
The 32,000-Hour Question
by MF Cormend

A while back I estimated how much one could earn per hour simply by using Foolish investment principles over the course of one's lifetime [see the Fribble "Overtime Work that Really Pays"]. Using certain assumptions, I figured that for an investment lifetime of 45 years, one would spend a total of 50 hours on a Foolish Four Portfolio, a variation of Beating the Dow. If one were to use Foolish principles actively to analyze small cap stocks, I estimated that the required time commitment over this same 45 years would equal 32,850 hours, or about two hours daily.

Recapping this analysis, the clear winner for having the most money at the beginning of those retirement years (age 65) was the Active Fool Management Portfolio. The estimated total return on this portfolio is about 36 million (yes that's right, million) dollars, assuming one starts at age 20, adds $2000 per year for the first decade of investing, $3000 per year for the second decade, $4000 per year for the fourth, etc. The Foolish Four approach would yield "only" 14 million dollars or so, assuming annual 22% returns versus 25% returns for the actively managed Fool portfolio. The Vanguard 500 Index Fund, by the way, makes a heroic, but alas relatively pitiful showing with about $600,000 at the end of the period.

The contrarian in me says, "I'll take the Foolish Four; you can have the extra 22 million dollars."

What?? Give up 22 million dollars? No problemo!

First, cut the 22 million dollars in half. Despite Bob Dole's pipe dreams, a substantial tax cut just ain't gonna happen; Uncle Sam needs to be fed. Second, 14 million dollars is more than enough to keep me happy (even 7 million dollars for that matter). The final and most important consideration is the true cost of that extra 22 (or 11) million dollars. Yes, it's those 32,000 or so hours.

With 32,000 hours one could:

Play an extra 8000 rounds of golf (if one's so inclined).

Read about 2130 extra novels (even more if there aren't any long words).

Hike the entire Appalachian trail nine times over.

Take an hour of piano lessons weekly for 50 years and still have 29,400 hours left over to practice.

Jog 144,000 miles, or take it easy and walk 96,000 miles.

Have 32,000 semi-meaningful conversations with a friend or family member.

Peruse a months' worth of posts on the Iomega message board.

Or why not do a little of each?

Of course the assumptions built into these numbers can and will change considerably given one's individual situation, but that's not the point. My point is simply that in our zeal to maximize our profits, many of us should step back and review why we invest in the first place. Hopefully it's to build a more enjoyable and fruitful life for ourselves or those closest to us. Possibly it's to retire early and enjoy one of the most precious possessions of all: free time.

Free time? With Beating the Dow in my pocket I'm already ahead of the game by 32,000 hours. Maybe I'll take 64,000 walks in the forest and ignore all those trees.

Transmitted: 11/5/96