Section 1

Investing Basics


This work is licensed under an Open Educational Resource-Quality Master Source (OER-QMS) License.

Open Education Resource--Quality Master Source License


Throughout the first book in this series, I was very critical of various ways of saving money.  I repeatedly stated in that previous text that your money must be working to make you more money.  If you stick it in a cookie jar, it is just sitting there losing value because of inflation.  In this section, we will look at various options for investing your money.  Investing is the process of putting your money to work making you more money.  There are many different ways to invest money.  Some are good, some are just okay, and others are downright bad.

First, before we can begin, you must realize an essential truth.  You, my friend, have been betrayed by your government.  When social security came into being, we handed over the fiduciary responsibility of managing our wealth to a federal agency.  The government never intended us to retire on social security alone, but we were not informed by the politicians.  Millions of Americans began to assume that they were financially secure; the term is even in the name.  I challenge you to name one single thing outside of the Constitution that we have turned over to the government that is done with any degree of efficacy.  The more Uncle Sam meddles in our affairs, it seems, the worse off we all become.  I do not recall ever having it explained to me that Social Security is a safety net, not a retirement plan.

If the situation was not bad enough, the government later decided that we are smarter than federal bureaucrats and that we should be responsible for investing at least some of our own money.  The notion of a 401(k) came out of this thinking.  The idea of a 401(k) was to supplement your pension and Social Security, not to replace them.  When companies learned that they could get rid of costly pension obligations by putting the responsibility of providing retirement income for workers off onto the workers and save a ton of money in the process, they began to do so in droves.  The idea of shifting the burden off on the little person to save money became so prevalent that public institutions started doing it too, and nobody really complained because “that’s how things are done these days.”

I don’t mean to come off sounding like a socialist that hates self-directed retirement savings.  I believe in freedom, and I am convinced that we should make the final decision as to what happens to our money.  In fact, I bitterly resent rules that limit us from making investment decisions that are available to an elite club of the very wealthy.  The assumption is that if you are not wealthy, then you don’t have the intelligence to determine risk for yourself.  Only massive wealth makes one smart, it seems.  I further object to a system of policies that give people the right to do all sorts of wonderful things to make them wealthy, and then no idea whatsoever how to use those tools.  To avert a humanitarian crisis of epic proportions, we must engage in the sort of libertarian paternalism that makes reasonable decisions by default for those who are too scared or too ignorant to make those decisions for themselves.

I also believe that fear and ignorance go hand in hand.  Finance is a mysterious world to the uninitiated, and we naturally fear the unknown.  Fear leads to inaction, and inaction leads to sustained poverty.  I am firmly convinced that education is the cure for all of these ills.  Just as we would be appalled to find that the army was placing young people in harm’s way without the benefit of basic training, we should be horrified to discover that we are thrusting those same young people into financial risk without any training at all.  I call for the infusion of financial literacy into the curriculum in every grade, and the addition of personal finance courses to every degree program in the country.

I will not, however, hold my breath until that call is heeded.  You, my friend, have been betrayed by your government.  Your government is not likely to fix the problem for you or your children anytime soon.  If you want to retire with dignity and comfort, you must remediate yourself and learn to use the powerful tools at your disposal.  Make no mistake, you can’t depend on government, and you certainly cannot earn your way to wealth.  Invest you must.

Last Modified:  07/11/20018

[ Back | Contents | Next ]