HOW DO YOU DEFINE "SAFE"?

December 08, 2023

Safe is not keeping your money in treasuries, bonds, or the bank for long term investing. It certainly is not safe to put your money into CDs thinking that this yield is a better investment than a diversified equities portfolio.

The way to think of safe is the following: Owning a diversified portfolio of businesses that are mainstream equities of profit seeking, earnings increasing, and dividend paying companies is safe.  This will give you the capital you need – to provide you with an income that you cannot outlive.

Cash dividends have been growing twice the rate of inflation since 1980. Equities’ overall return with these dividends reinvested have been growing at a compound rate of 7% in excess of inflation for at least the last century.  Owning a diversified portfolio of these businesses has been not just massively profitable to investors, but effortlessly so.

“Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.”