Let’s say you’re a professional woman with a nice little nest-egg put aside. You’re perhaps juggling a career and a family. Maybe you’ve got a house and a mortgage. You’re crazy busy. But your nest-egg? Not so much. It’s just sitting there. It could be in what banks laughably call a “high interest” savings account, which might be giving you the princely sum of 1% a year…if you’re lucky. Or, worse, it could be in a bank money market fund, which yields something close to 0%. Maybe awhile ago you took a chance and hastily bought some units in a stock market mutual fund that your bank teller or insurance agent suggested. That’s probably gone nowhere, too. The bank teller has moved on. And your insurance agent’s forgotten about you.
So what do you do? Clearly, things can’t go on like this for too long. Sadly, though, they do. Very often, your busy lifestyle just simply pushes any thought of investments right to the bottom of that ever-growing to-do list. And so inertia kicks in, and your money just stays where it is…being lazy, and making other people (usually banks) very rich.
I want to turn that around, and show you how to use your money to make you very rich. And that starts with some basic decisions about where to put it. Financial planners and investment advisers have a fancy term for that: “asset allocation,” or choosing the right mix of investment types. And research has shown that choosing the right mix can be even more important in building wealth than choosing the individual investments themselves.
So instead of, say, just jamming your nest-egg at the bank teller and asking her to put it somewhere “safe,” it’s a lot smarter to first ask yourself how you want to divide that money up. The principle here is that if you put some of your funds into risk-free investments, some into income-producing investments, and some into growth investments, your overall portfolio (and now you really can call it a “portfolio”) will be a lot more effective in achieving your financial goals (and I hope that includes true financial independence). That’s because your money is working hard to make more money for you, and paradoxically, with not much more overall “risk” than you had keeping it in a savings account (which actually is pretty risky, because you’re really losing money from taxes and inflation).