Wealth

Growing and Preserving Your Wealth Can Be the Most Important Thing You Ever Do

It’s not very easy for most of us to accumulate however much wealth we may be able to. The next worry is how to grow and preserve it – how to make it last until you no longer need it.

There are many obstacles in the way: the normal and unexpected costs of living, taxes and inflation being the major ones.

The earlier you start your savings program and the better use you make of tax sheltered vehicles like 401K plans, the more wealth you will begin to accumulate.

Sad to say it is not sufficient to put that money in a savings account and forget about it. Investing can be a difficult concept for many and, if it is, they should seek profession help. Read financial professionals to learn more.

If you want to do it yourself, I highly recommend Andrew Tobias’ The Only Investment Guide You Will Ever Need.

In spite of its grand title, it’s a short, easy to understand book written in a breezy and witty style. Mr. Tobias spells out everything you need to do to grow and protect your income. And he is extremely conscious of costs and how they will affect you final outcome.

He presents suggestions for low cost investing methods, no matter what your age or financial circumstances.

After reading this book I would suggest you pass it on to your children – or give them their own copy as a gift. They will learn more about savings and investment than just about any school will teach them.

There are two aspects of wealth preservation. One is to invest your money in a way to maximize returns and make your nest egg as big as possible.

The second is to manage this money when it comes time to use it, e.g. in retirement, in such as way that your earnings match or exceed your withdrawals. Otherwise you will run out of money.

As I said before, you will not be able to achieve any appreciable growth using savings accounts, especially if the earnings are taxed.

This is not to say that cash in a money market fund or CD should not be one of the methods you use.

Ideally you should put 50% or more of your savings into a no load, low cost mutual fund, another portion of your money into bonds and the rest into cash.

There are many newsletters, advisory services and books about how to diversify your investments, including Mr. Tobias' excellent guide. I would suggest you read some of them if you are going to direct your own investments. I'll let them you you specific advice about asset allocation.

Over the course of years, even taking spectacular market crashes into account, the stock market has over the long term produced the best after inflation returns for investors.

So, even if you are 70 years old and retired you should keep at least a portion of your money in stocks. If you don't you may find you outlive your portfolio.

Being retired does not relieve you of your responsibility for managing your money. As a matter of fact, since you’ll have more time on your hands, you should be able to spend more time mastering the basics and making sure your nest egg survives you.

Part One: What is True Wealth?

| Top | Financial Planning | Home |