The Simple Path to Wealth

On Saving and Thrifty Lifestyle The Power of High Savings Save and invest an unwavering 50% of your income. The beauty of a high savings rate is twofold: you learn to live on less, even as you have more to invest. When you can live on 4% of your investments per year, you are financially independent. Financial Independence vs. Dependence If your lifestyle matches or exceeds your income, you are a slave. It’s better to adapt yourself and your attitudes to the numbers than to adapt the strategies to your psychological comfort levels. Long-Term Savings Strategy If financial independence is your goal, your savings rate in these years should be high. As you invest that money each month, it serves to smooth out the market’s volatility. Be persistent. Life is uncertain. On the Stock Market and Investing Fundamental Investment Rules Rule #1: Never lose money. Rule #2: Never forget rule #1. The Stock Market as a Wealth-Building Tool The stock market is a powerful wealth-building tool, and you should be investing in it. Embrace indexing. Crashes, pullbacks, and corrections are all absolutely normal. Avoiding Short-Term Speculation Any investing done short-term is, by definition, speculation. Market timing is an unwinnable game over time. To play this market-timing game well even once, you need to be right twice: first, you need to call the high, and then, you need to call the low. Market Dynamics and Long-Term Perspective The market always recovers. Always. Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing. Common Pitfalls in the Stock Market Most people lose money in the stock market. Here’s why: We think we can time the market. We believe we can pick individual stocks. We believe we can pick winning mutual fund managers. Dollar-Cost Averaging By dollar-cost averaging, you are betting that the market will drop, saving yourself some pain. For any given year, the odds of this happening are only about 23%. But the market is about 77% more likely to rise, in which case you will have spared yourself some gain. With each new invested portion, you’ll be paying more for your shares. Put all your eggs in one basket and forget about it.

Beginnings “If you reach for a star, you might not get one. But you won’t come up with a hand full of mud either.” Spend less than you earn—invest the surplus—avoid debt. Carrying debt is as appealing as being covered with leeches and has much the same effect. If your lifestyle matches—or god forbid exceeds—your income, you are no more than a gilded slave. Avoid investment advisors. Too many have only their own interests at heart. By the time you know enough to pick a good one, you know enough to handle your finances yourself. It’s your money and no one will care for it better than you. Money can buy many things, but nothing more valuable than your freedom. Life choices are not always about the money, but you should always be clear about the financial impact of the choices you make. Try saving and investing 50% of your income. With no debt, this is perfectly doable. The stock market is a powerful wealth-building tool and you should be investing in it. But realize the market and the value of your shares will sometimes drop dramatically. This is absolutely normal and to be expected. When it happens, ignore the drops and buy more shares. 股市暴跌是必然的,高度确定的.就像天会下雨一样,不可避免的,那是你买入的机会 This will be much, much harder than you think. People all around you will panic. The news media will be screaming Sell, Sell, Sell! When you can live on 4% of your investments per year, you are financially independent. “You know, if you could learn to cater to the king, you wouldn’t have to live on rice and beans.” To which the monk replies: “If you could learn to live on rice and beans, you wouldn’t have to cater to the king.” ...