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Harry Browne / Fail-Safe Investing

The 17 Simple Rules of Financial Safety

Fail-Safe Investing is built around the 17 Golden Rules of Financial Safety. Here is one of those rules.

Rule #1: Your Career Provides Your Wealth

Working together, your career and your investments can build a prosperous, secure future. But never forget that your wealth begins with your career - the way you make your day-to-day living.

If you save enough from your business, profession, or job, you eventually may earn more from investing than from working. But unless you first pay attention to working and saving, you'll never share in the wealth that investing can bring.

You might see advertisements claiming that investing just a few thousand dollars will put you on the road to riches. But investing is the second part of the road. The first part is the money you earn and save from your job. Rarely does someone make a large fortune from investments alone.

And common sense tells you it has to be this way.

Think about your own occupation, for example. Could someone without your training, your skills, your experience, and your talent outperform you at your job?

Of course not.

And yet too-good-to-be-true advertisements invite you - an amateur with no particular education, training, or experience in speculation - to compete, in your spare time, with professionals who have devoted their entire careers to investing, and who continue to eat, breathe, and sleep investing every day.

The sad fact is that most part-time investors who try to beat the markets lose part or all of the savings they've worked so hard to accumulate. Some of them wind up using their working income to cover investment losses - and maybe even working overtime to do so.

When the quick-money approach does produce gains, the profits usually are smaller than if you had simply made a few conservative investments and left them alone.

Could you beat the pros by reading a book or a newsletter?

You tell me. Did Luciano Pavarotti become the world's leading tenor by studying a book? Did Babe Ruth learn to hit home runs by subscribing to a newsletter?

Can you make big profits by relying on an expert who does have the proper qualifications?

How do you identify a true expert? That task is no easier than picking the right investments. If you don't understand investing as well as the pros, you won't know how to evaluate those who seek to advise you. And you can't rely on an advisor's track record, even when it's presented honestly. Track records tell you only how advisors did in the past - not how they will do next year.

Violating the Rule

You're violating Rule #1 if you think your investments can be the sole source of your retirement wealth - or if you steal time from your work to manage your investments - or if you think about abandoning your job to become a full-time investor.

Why You Must Invest

Does this mean you can't achieve anything by investing?

No, quite the contrary: Investing can do so much for your future that it would be a terrible shame to squander its true opportunities by chasing after rainbows.

Investing wisely can amplify and enhance what you earn by your labor. And it is the only thing you really can count on for your senior years. You can't depend on Social Security to take care of you.

Social Security operates on a simple principle:

You give your retirement money to politicians and they squander it on something else.

They may spend it on someone else's retirement - or on building monuments to themselves - or on programs to curry reelection support from special-interest groups. But the one thing they will never do is to put your money in a trust fund earmarked for your retirement.

Social Security operates on a basis that would send the owners of any private insurance company to prison: It expects to repay your "contribution" with money it will take from someone else later. As the years pass, it becomes harder and harder to keep this pyramid scheme going.

The system will be reformed someday - and perhaps even completely taken away from the politicians. But the sad and silly history of politics warns us that real reform won't happen until the system is close to collapse. In the meantime, the only changes will be to reduce benefits, delay the retirement age, or increase taxes.

The closer you are to retirement now, the bigger chance you have to get something back from Social Security. But, in general, the safest way to consider the matter is to assume you won't get anything - and then treat anything you do receive as found money.

You can count on for your retirement only what you put away yourself. And you must make sure that what you put away is safe and growing at a healthy rate.

Fortunately, if you handle your investments properly, you can count on them to finance your retirement - and more. And the younger you are, the easier it is to provide a good retirement - and the less reason you have to worry about Social Security.

Benefits of Investing

If you apply common sense, your investments can:
  1. Assure you of a secure and comfortable retirement.
  2. Enhance your life before then - perhaps by providing a better home, a better education for your children, or whatever may be important to you.
  3. Allow you to leave something substantial for your heirs.
Investing won't promote you from the middle class to the very rich. Most people who hoped it would do so have wound up worse off. So don't take risks with complicated investment schemes in the hope of multiplying your capital quickly. Instead, set up an investment plan:
  • That protects and enhances what you've earned at your job, and
  • That isn't so complicated you'll be tempted to abandon it.

In other words, keep it safe and simple.

If you do that, you'll be free to concentrate on what you do best - free to make a great deal of money in your career.

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