The key to financial freedom and great wealth is a person’s ability to convert earned income into passive and/or portfolio income.

The greater the potential for reward in the value portfolio, the less risk there is.

The long term solution to the financial crisis is to move beyond the ‘growth at all costs’ economic model to a model that recognizes the real costs and benefits of growth.

The real payoff of asset allocation comes when you figure out the right mix of how much of your money you keep safe and how much you’re willing to risk to get greater rewards and have the potential to grow faster.

And finally, we learned that wealth without risk is a possibility. Sure, there is risk in everything, but we learned that certain structures will allow us to participate when the market goes up and not lose when it falls!

Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained. By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long- term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond

Before we can determine a rational basis for making asset-allocation decisions, certain principles must be kept firmly in mind. We’ve covered some of them implicitly in earlier chapters, but treating them explicitly here should prove very helpful. The key principles are: 1. History shows that risk and return are related.
2. The risk of investing in common stocks and bonds depends on the length of time the investments are held. The longer an investor’s holding period, the lower the likely variation in the asset’s return.
3. Dollar-cost averaging can be a useful, though controversial, technique to reduce the risk of stock and bond investment.
4. Rebalancing can reduce risk and, in some circumstances, increase investment returns.
5. You must distinguish between your attitude toward and your capacity for risk. The risks you can afford to take depend on your total financial situation, including the types and sources of your income exclusive of investment income.

The businesses that thrive over the long haul are likely to be those that understand that cost cutting and revenue growing aren’t mutually exclusive. Eternal vigilance to both the top and bottom lines is the new ticket to prosperity.

The history of the past fifty years, and longer, indicates that a diversified holding of representative common stocks will prove more profitable over a stretch of years than a bond portfolio, with one important provisio—that the shares must be purchased at reasonable market levels, that is, levels that are reasonable in the light of fairly well-defined standards derived from past experience.

Economic freedom is a highly desirable state — but in bust and boom we must be prepared to face the its consequences.

Tony, by having a fifty-fifty portfolio, you really have more like ninety-five percent of your risk in stocks!

Sir, there are three principles, greater than all others, on which, in my opinion, all good finance should be based. The first of them is that there should always be a certainty that whatever the charge may be it can be paid. That, I believe, is of vital importance. The second is that, in times of peace and prosperity, the people of the country should reduce their Debt; and the third point is that they should reduce their Expenditure.

Temperament is also important. Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success.

You invest in companies with great long-term prospects.