A Scientific Approach to Investing

IS SOCIAL SECURITY ENOUGH?

Social Security should provide some income, and perhaps you have a pension that will also help out. However, because Social Security is only enough revenue to subsist in life, your portfolio is where you will get the extra funds that add abundance.

You will want at least:

• $500,000 with a pension

• $750,000 without a pension

• $1 million plus for a more abundant lifestyle

HOW TO GET THERE

Time is the kindest friend to investors. The general advice is to save 15% for retirement. Depending on when you get started (and how long you plan to work), you may need to adjust that up or down. However, take heart—even someone turning 50, who may feel behind, can still end up with a million dollar reserve (see below).

WHAT IS RISK?

Another component of investing is having your money grow. Growth does involve risk, (and anyone saying otherwise is selling you something—run!). However, there are ways you can be smart about the risk you take on.

THE RIGHT KIND OF RISK

An investment that can end up valueless is not an investment. It is gambling. Real investing, on the other hand, may go up and down but does not have the ability (without the world ending or something similarly catastrophic) to go to zero.

Thus, the right kind of risk has lessened the damage done to your portfolio of individual 

companies failing. It mitigates that risk by owning hundreds or even thousands of companies.

Real investing looks at how much volatility a portfolio has—that is the risk an investor should focus on mitigating. Start by getting the right mix of stocks (equities) in your overall portfolio. The higher ratio of stock in your portfolio, the higher the returns have been. (And yes, the higher the volatility as well).

Selling when the market is down (because your portfolio is too aggressive) is how losses that are only on paper become real losses.