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November 28, 2011


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I love this summary. It really is that simple, and yet it eludes so many people. I sent the article to three of my friends before I'd even read half of it.

@Jonathan - Thanks for your your support. I'm glad you liked it and appreciate you spreading the word.

Great post. The theory is easy, the application is hard. "Invest wisely" is relative, but I get the point. Thanks for the read.

@Romeo - Yes, I agree. Simple to understand but hard to live. Success is generally not about the "how tos" but about the consistent implementation. That is why I added the second section about habits. This is critical - probably more than the first sentence.

My wife and I took the Financial Peace University course just over two years ago. One of my favorite parts was when Dave Ramsey explained the difference between broke and poor people.

Broke - temporary/"just passing through", possibly due to just being out of school or between jobs, just getting financial house in order.
Poor - doing poor people stuff (payday loans, running up debt, living beyond means), possibly a victim mentality or entitlement issue.

He said if you're broke or poor and do "rich people stuff" (this article!), your situation is bound to improve. We are truly blessed to live in a country where we are able to make these decisions freely.

Yes, there is a lot of free information on investing out there. That doesn't make it easy to understand. And a lot of it is contradictory.

@Melissa - Yes, there is a lot of noise. However, FMF has been very consistent on this blog. There is a proven asset allocation strategy using low cost providers of index products(i.e. Vanguard) that is the best starting point and easy enough for anyone to implement.

"Wisely" is the key word. This word can equally well be applied to almost every thing a person does, such as Study, Spend, Marry, Eat, Drink, Drive etc. etc.

Unfortunately there is no one size that fits all, and the devil is in the details.

I spent the first two years of my retirement developing a comprehensive computer program that allowed users to select the very best mutual funds for their needs, based upon many different performance parameters. There were also modules that allowed users to determine the overall health of the market, or market sectors, with a view to reallocating their investments as market conditions changed. The manual for my software contained over 300 pages of instructions. I also read many "thick" books on the subject of investing along the way. My software requires the MS-DOS operating system and has not been available since 7/2008.

Becoming a wise investor is far from being easy. Whatever software you use to help with your investment choices requires spending a lot of time and effort to acquire "Wisdom" along the way, that is if you hope to obtain outstanding results. If you are not willing to make the investment of time that is required your results will doubtless be mediocre and you will have to suffer through large gut wrenching drawdowns in the value of your portfolio.

The bottom line is that "Investing wisely" is highly important in obtaining excellent results but acquiring the necessary wisdom does not come easily and you have to learn from your mistakes, and everyone makes mistakes.

In 1992 when I retired at age 58 my portfolio was in the low six figures and I invested very aggressively, rode the internet bubble up to the top in 3/2000, and then sold everything during the four trading days following the peak. Now, twenty years later my portfolio is in the upper 7 figures and since 11/2007 I have invested ultra conservatively in bonds, purchased below par, that I will be holding to maturity to eliminate possible losses, and earn 5% in tax exempt, and tax deferred interest. This year I am on track to make more than 4 times my gross salary when I retired.

the plan is indeed solid, proven and time tested. however, many fail to realize that this plan is predicated on hope and time - the fact that one will be alive decades from today and hope that the investments return a handsome profit/gain over time. that is why it is important to widen the gap between what you make and spend, and for most this is a limiting factor given the income ceilings they face at their job. this is where side gigging enters the scene.

Hey, I think this has some good points, but I am the only one that thinks it is def too long for two simple sentences. I kind of lost interest halfway through the post, and I consider myself very frugal and interested in personal finance. Just with all the great content out there that Ive read, with this one I lost interest. Same old emotional mumbo jumbo that we all know.

"Investing wisely" isn't all that important, either.
"INVEST" is the important thing. Obviously, you can't
get rich wildly chasing the latest penny stock or putting
all your money in your checking account.....but even
investing in an undistinguished load fund with an
insurance company or bank is far better than never
getting started.....

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