Dreams Risk-Free

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If I had $1 million in cash to invest and wanted to do so risk-free, or virtually risk-free, I could put it in 1-year CDs and make about 4% or $40,000. Right now inflation is at about 2-3%. So your real earning is about 1% ahead of inflation.

$40,000 is not that easy to for a single guy to live live on. And in some cities would be nearly impossible to live on. Throw in a wife and kids, and forget it.

My salary now is about $78,000, so since we are dreaming, it would be nice to have enough money to earn my salary risk-free.

Then I could retire, and just live off the risk-free income, without much fear of losing the principal, or I could quit my boring job and try to do something more interesting.

So to earn 78,000 at 4% CD interest I would need $1.95 million, so say about $2 million dollars.

Even then, if I were to quit my job, I would give up medical benefits. And I would not be earning a salary so I would not be paying into social security, and I would not be getting much in social security benefits even when they kick in at age 62-67.

You can, of course, try to increase your returns by investing in stocks and real estate. But real estate is get rich slow generally.

Stock returns can be incredible, but easy come easy go. Sometimes you hit a winner, sometimes you miscalculate and get a loser.

I put quite a bit of money in MRK Merck when it was at 47 or so. And I made a few percent and got out. Then it fell to 27. That could easily have wiped out my portfolio, had I been 100% invested in it. A solid company, with no inkling that something that devastating would happen.

So while stock investing is enticing. You should never forget that you could wake up one morning and find your portfolio is down by 50% or more.

Never underestimate the fact that stock investing CAN BE profitable, but is always inherently risky. More often than not an intelligent cautious investor will make good money. But even the best stock picker can lose a lot.

It is NOT easy money. It takes study, hard work, patience, research, and RISK. And if you invest long enough, you will eventually come face to face with the downsides of risk.