And what's your alternative? Cash under the mattress gets killed by inflation. Gold has its runs but usually underperforms. Bonds also get killed in a downturn.
However, the example is simply wrong (IMO) since it assumes that within a 30 year timeframe you'll have gained 8% on average (adjusted for inflation). If this would be true, thne yes it would be a decision-making trap. I think that's what morley is getting at.
I'm arguing it's a tough sell that the S&P 500 works like that. If one would agree that the S&P 500 might not continue to give 8% ROI on average over a 30 year time frame, then one might consider doing something else with their money. For example, maybe it's more fruitful to invest in yourself to upskill even more rather than putting your money into the markets. I don't know I haven't researched it, I myself try to beat the market, it's a fun endeavour. The jury is still out.
Such that, if the "burn rate" for my household today is $60k/yr, and I store $60k in investments, then when I withdraw at some future date $X will still be enough to support my household for a year.
Physical cash is terrible but to an investor, "cash" tends to mean something like t-bills, which over the past century have done slightly better than inflation. Gold is horrible if you have too much of it, but it tends to do well in equity crashes, so mixing in a little can be helpful. Bonds also sometimes do well when stocks go down, though I think that's more likely when you start at higher interest rates. Commodities can have 15-year bull markets independent of everything else. An investor in Japan would have done fine if they had a lot of foreign stocks. Etc.
https://www.google.com/finance/quote/GLD:NYSEARCA?comparison...
10 year Treasury outperformed NASDAQ https://www.google.com/finance/quote/GLD:NYSEARCA?window=YTD...
That's diversification, even if it just means losing less.