Feb 25
Single Biggest Mistake Investors Make
If you are not saving, what in the world are you doing reading this blog? Lack of a saving plan or not implementing it. is the single biggest mistake potential investors make. If you do not save, you have nothing to invest and you will always be a “potential” investor. Get out of the spending ruts and being saving today.
“Money makes money. And the money that money makes, makes money.“ – Benjamin Franklin
William J. Bernstein scares the bejeebers out of his readers in his chapter, “Building Your Portfolio.” I quote from his Investors Manifesto book.
“Each dollar you do not save at 25 will mean two inflation-adjusted dollars that you will need to save if you start at age 35, four if you begin at 45, and eight if you start at 55. In practice, if you lack substantial savings at 45, your are in serious trouble. Since a 25-year-old should be saving at least 10 percent of his or her salary, this means that a 45-year-old will need to save nearly half if his or her salary. Most 45-year-olds will find this nearly impossible, if for no other reason than the necessity of paying living expenses, payroll taxes, and income taxes.“
The above paragraph is why I am such a strong advocate of The Golden Rule of Investing. Look it up on this blog. However, all is not lost as I’ve known individuals who had almost zero savings until after age 55 and still managed to build a nice nest egg. Unfortunately for today’s investors, those portfolios were built during the greatest bull market over the last 100 years. It is going to take a much higher savings rate considering the headwinds we face in the current market.
If you search for “saving” on this blog you will come up with suggestions of how to put away money for retirement. Bernstein’s book referenced above is an excellent volume as well as Ellis and Malkiel’s “The Elements of Investing.” I’ve recommended these books in the past.
Photograph: Chihuly Glass at the Desert Botanical Garden near Phoenix, AZ.
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February 25th, 2010 at 4:33 am
In tomorrow’s entry, look for other mistakes to avoid when investing.
Set up a reading program from among my top ten investment books.
Lowell