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.