Life After Full-time Work Blog

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#68 Safety And Growth As Investment Goals

Here’s a clarification of the goals of investment safety and growth.

In Post #6 ( I said that we have two investment goals, safety and growth, that they’re at opposite ends of the spectrum, that they’re both sensible, that we tend to place ourselves somewhere between the two ends, and (in Post #42) that they’re psychologically equivalent to a desire to sleep well or to eat well (

All of that may have sounded like common sense to you. I hope it did. But it’s surprising how often ordinary people and professionals are confused in the way they use those ideas. Some professionals act as if eating well is the only thing to focus on, others as if sleeping well is the only thing, and the ordinary person is often ignorant of the consequences of how different the two approaches are: “Hey, these guys are professionals, they must know what they’re doing, and I place myself in their hands.”

That may be OK. But first, let me explain to you some of the principles that follow from my simple assertion in Post #6. Then, if you so choose, you can challenge your expert if he or she appears to go against the principles.

I refer to the principles in several Posts. That’s why I want to gather them here.


Safety essentially means that you don’t want to suffer the financial effects of bad stuff happening to you. I’m talking purely about financial bad stuff, of course.

There are two possible ways to arrange to meet this goal. One is to avoid the bad stuff itself. The other is to arrange for compensation to mitigate the effects of bad stuff happening. Either way, you’re left whole, financially.

Arranging for compensation is insurance. Again, this can be achieved in two ways. One is to pool your risk exposure with others, for example by buying an insurance policy. The other is to self-insure, to make arrangements all by yourself so that your goal of avoiding the bad financial outcome is achieved.

Growth essentially means that you want good financial stuff to occur. Good stuff is never certain; but you do have to give it the opportunity to occur. (There’s the story of the guy who complained to the Lord that his dream of winning the lottery had never been fulfilled. To which the Lord very properly replied, “I keep telling you: first you have to buy a ticket.”)

Also, when you create the conditions for good stuff to occur, you invariably also create the conditions for some form of bad stuff to occur. In other words, you forsake safety and expose yourself to risk. Opportunity is always linked to risk.

Safety always involves a cost. This might be indirect, like forsaking the opportunity for growth. Or it may be direct: the explicit (and certain) cost of adopting a safe position.

Growth always involves a risk exposure.

All of that is why growth and safety are at opposite ends of the risk spectrum.


It’s rare for us to want to be exclusively at one end of the safety-growth spectrum. Not that there’s anything wrong with being at one end, obviously. As long as it’s a thoughtful choice, it’s perfectly OK.

But most of us place ourselves somewhere in between. I’ve already explained, in Posts #42 and #43, how to consider the financial and psychological angles before deciding on our stance. The thoughtful conclusion tends to take the form: “As long as I have X, I’m happy to go for growth with the rest of my pot.” Of course, it’s typically a difficult decision, to specify what X is. And X could be a number, or it could be an outcome we specify. There are many varieties of safety, and we think of it differently.

But that’s the principle we tend to use: safety first; then the rest follows. First we survive; then we can seek to thrive.

I’ll expand on these ideas in the next few Posts.



If we understand safety and growth as being at opposite ends of a spectrum, we can decide where on that spectrum to place ourself.

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I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.

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