The Old and the New
7 Rules of
Financial Security

Rule No. 1: Risk
 
Old Rule: If you can stomach the ups and downs that come with risk, you'll be rewarded.

New Rule: Risk isn't about your stomach. It's about making or missing an important goal.

Rule No. 2: Cash

Old Rule: Keep enough money in ultra safe accounts to cover life's emergencies, but no more.

New Rule: Relying more on cash can rescue you in an "asset emergency."

Rule No. 3: Human Capital

Old Rule: The longer your time horizon, the more stocks you should own.

New Rule: Time isn't everything. You must also consider your earnings potential.

Rule No. 4: Borrowing

Old Rule: Borrowing sensibly is a good way to build wealth.

New Rule: Borrow cautiously. You have to worry about the other guy's debt too.

Rule No. 5: Housing

Old Rule: You can expect your house to appreciate handsomely over the long run.

New Rule: Your home won't make you rich. But it is an important savings tool.

Rule No. 6: Diversification

Old Rule: A diversified portfolio lowers your risk.

New Rule: Diversification won't always save you - and you need more of it than you think.

Rule No. 7: Retirement

Old Rule: Retiring early is a prize.

New Rule: Retiring early is a problem.