Back to Basics

What is investing? In the broadest sense, it is the sacrifice of present dollars for future dollars. As an investor, you forego the use of money you have now in hopes of having more to spend at a later date. Usually, there is some risk involved. The money you get from an investment may or may not increase your purchasing power. It all depends on the investment's rate of return and the rate of inflation.

People tend to attach too much emotional baggage to money and investing. Most individuals adhere to one of the following mottos: "Money can't buy happiness," or "Happiness can't buy money." Folks in the first group worry that an interest in investing will make them seem superficial or greedy. The latter crowd equates riches to nirvana.

Both schools of thought are silly, in my opinion. Investing is morally neutral; it's what you do with the money that counts. Bill Gates, who people love to vilify for being excessively wealthy, formed a charitable foundation a few years ago. Actually I think it was his wife's idea, but we'll give him some credit. The Bill and Melinda Gates Foundation, with over $21 billion in assets, has supported causes like vaccination programs for children, cervical cancer prevention, and AIDS research. People have questioned Bill's motives, but the fact remains that he and his wife are now the greatest philanthropists in history (at least in dollar terms). I point this out merely to emphasize that money is not inherently evil.

Most of us invest for more mundane reasons. We might hope for a worry-free retirement with no compromise in lifestyle. We might have a goal of paying for our children's or grandchildren's educations. Or perhaps we wish to contribute to a favorite school, religious institution, or other charitable cause. In any case, we are far more likely to realize these goals if we invest wisely.

Knowledge is an investor's greatest asset. Whether you invest for yourself or hire someone to invest for you, understanding the basic concepts of investing and finance will help you make better decisions. The purpose of this newsletter is to provide you with an easy way to increase your investing IQ. By offering practical information on personal finance, we hope to make you a better investor and help you realize your financial dreams.

January 1, 2001

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