Phil Town's Rule #1 Investing

Rule #1 Investing is a simple guide to returns of 15 percent or more in the stock market, with almost no risk. In fact, Rule #1 investing is practically immune to the ups and downs of the stock market. Rule #1 investing is important today for many reasons, the least of which being that baby boomers currently have an average of about $50,000 in the bank to retire on, twenty years from now. They think they need a million but aren’t going to get there. Younger generations have a hard time paying off debt, saving money, and even thinking about investing on their own in the market. If people do nothing but invest in low-risk government bonds that pay about 4 percent, they’re guaranteeing themselves a stressful retirement. On the other hand, striving for a 15-percent return by guessing what to invest in (“speculating” in investor-speak) is a guaranteed way to lose money. Rule #1 solves the problem of how to get high returns with low risk, and it can get you to retirement a lot sooner with a lot less money than you imagine. The Rule was first set by Columbia University’s Benjamin Graham and then, more famously, adhered to by Graham’s student and the world’s most successful professional investor—Warren Buffett. According to Buffett, “There are only two rules of investing: Rule #1: Don’t lose money . . . and Rule #2: Don’t forget Rule #1.”