Question: I’m retired with a pension that more than covers all my expenses. I’m debt-free, have an emergency fund and give to charity — so I think I have all my bases covered. Based on your prediction that the Dow Jones Industrial Average will eventually hit 100,000, if I had a mythical $500,000 to invest, why shouldn’t I put all of it into ETFs that simply mirror the Dow? By the time 2030 rolls around, that investment would be worth $3 million or more.

Ric: For those who don’t know, I’m on record as saying that I believe that the Dow (about 23,500 at this writing) will reach 100,000 by the year 2030. I’ve also said that if I’m wrong, it will hit 75,000 — and if I’m really wrong, it might hit 50,000. In any case, I’m convinced the Dow will be dramatically higher in the future.

With that in mind, would I advise you to put that entire $500,000 into an investment that mimics the Dow?

No, and here’s why.

Although you are convinced that you will leave the money invested for 15 years, life has a funny habit of getting in the way. You might discover that your time frame is wrong. You might experience a change in your health, job or marital status.

Family circumstances might change, causing you to use your money to help children or relatives. Children or other relatives might need money because of changes in their lives. Because you’re charitably inclined, you might become motivated to help a charity that is desperately in need. Lots of things could come up unexpectedly, causing you to say, “Oops, I need the money now.” And that might happen at precisely the moment when the stock market tumbles — like it did in 2008. If you had invested in the year 2000 with a 15-year horizon but suddenly needed the money in 2008, you wouldn’t have been happy.

Thus, while history shows that the stock market has been the best-performing asset class over long periods, you don’t live in a spreadsheet. You live in the real world, and life gets in the way sometimes. That’s why you need to diversify — in case you must interrupt your long-term strategy.

There’s another reason not to mimic the Dow: It’s a list of only 30 stocks. And they are all among the very biggest companies in the world. That’s a highly concentrated way to invest. A stock portfolio should also include midsized and small companies, as well as foreign companies. So even if you choose to place some of your money in stocks, please do so in a more diversified fashion than a Dow-mirror allows.

An index is a portfolio of specific securities (common examples are the S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index.

Past performance does not guarantee future results. Investing strategies, such as asset allocation, diversification, or rebalancing, do not assure or guarantee better performance and cannot eliminate the risk of investment losses. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies. Funds and ETFs are subject to risk, including loss of principal. All investments have inherent risks. There can be no assurance that the investment strategy proposed will obtain its goal. Past performance does not guarantee future results.