Life After Full-time Work Blog

Learn about preparing for life after full-time work through posts from Don's upcoming book.

#6: Thoughts About Investing

All that’s necessary is to understand a couple of very basic things: why people invest, and what sort of general goals they have for their investments.

Where should we start, when we think about investing?  Here’s a simple commonsense definition.  Investing is setting aside money today to give to someone (or to some entity) that you hope will bring you more money in the future.  When you expect to receive it, whether your expectation is based on a hope or a promise – there are all kinds of variations.  But basically, it’s a sacrifice today to get more tomorrow.  That’s it.

You don’t need to know the legal definitions of assets, you don’t need to be intimately familiar with investment history, you don’t need to know the mathematics of statistical distributions, you don’t need to understand long tails or fat tails, you don’t need to know where and how to do trading.  You don’t need any of that in order to understand investment principles.

If you have an investment, sometimes you can sell it to someone else, if you can agree on a price.  And if there are lots of willing buyers and sellers, and lots of information about the prospects of a particular enterprise, it won’t be difficult to reach agreement on a price that buyers and sellers agree is fair.  Of course, since the future is unknowable, some will do better than others at the agreed price – but in the absence of a crystal ball, the prospects favor neither buyer nor seller at the expense of the other.

You probably already realize that people hate to take risks, particularly large risks.  (Surprised?  Of course not!)  But some will be willing, at least to some extent.  In fact, it makes sense to divide investments into two basic types: safety-oriented (where relative certainty of the outcome is more important than growth prospects) and growth-oriented (much more profit hoped for – but less certain).

How you decide to split your investments between safety-oriented and growth-oriented is a fundamental question.  And there’s no one-size-fits-all right answer.  It’ll depend partly on your financial position and partly on psychological considerations.  In the book (and in later postings) I’ll go into these in some detail.  You’ll be glad to know that you’re already equipped to think about these considerations, once you see what the relevant questions are.



Investing means setting aside money today in the hope that it will produce more in the future. There are basically two kinds of investment: safety-oriented (where relative certainty of the outcome is more important than growth prospects) and growth-oriented (much more profit hoped for – but less certain).


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.

5 Responses to “#6: Thoughts About Investing”

  1. Don Ezra says:

    Reader JN wrote to me in an email (and gave me permission to publish it): “I don’t know about US taxation, but over here it is fairly important to understand the implications of the tax system on one’s choice of investments or you can face a very hefty tax bill, so I wondered if it is sound advice to say you don’t need to understand taxation? I would be concerned for anyone launching into investments without some understanding of how they can be hit by the taxman!”

    JN is absolutely right. Taxes are very important. I was being extremely (and unnecessarily) precise in saying that you don’t need to understand taxation. What I meant was that the definition of investing, and the existence of safety and growth as goals, don’t depend on taxation. But of course what you get from an investment depends greatly on taxation. I have removed the relevant words from this posting. In fact, JN’s comment prompts me to say something about taxation in the next blog posting. So, many thanks!

  2. Mohan Kinra says:

    Hi Don:
    I feel lucky to be in a position to read your blogs.
    This is the first one I am reading and look forward to reading all future ones and somehow get the past ones (1-5) from you.

    The one point I am struggling with is my own “inner chatter” in response to the opening paragraph, which suggests that we normally put aside money to get “more” in the future.

    Unfortunately, I have been so inactive in managing “future money” that my “inner chatter” seems to say ” Mohan, if you keep on being inactive, then you will have to feel lucky, even if you “break even”

    That being said, your blog had certainly inspired me to get off this “inactive state” and to move into the “active state”
    Thank you

    • Don Ezra says:

      Hi Mohan, thanks for writing. The previous 5 should be available under Blog; if you can’t find them, email me and I’ll send them to you. You’ll see that the very first one suggests a strong motivation for creating your future money. It’s best to read this at the start of a working career (as KC suggests), but starting late is better than never.

  3. J. J. Woolverton says:

    I have instilled in my kids that they are unlikely to get “rich” on a salary. This is why this section is so important. I told my two kids that I would pay for their university education if they promised to do three things for me: no matter what field of study they chose, they would have to take Accounting 101, Economics 101 and, when finished with university, the Canadian Securities Course. All three will have an impact on your life as you go through it — you must understand the basics of all three. For investing, you have to know what to do with your money. My takeaway: have a thorough understanding of the power of compound interest.

    • Don Ezra says:

      Thanks for the personal family angle. You know, I once heard someone quote Einstein as saying that the most powerful force in the universe is compound interest — but I’ve never been able to track down the source.

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