Cato
2009-04-26 07:08:03
I would add the ancient conservative Swiss banker formula for ‘risk’ money — Only use the “interest on the interest” for further investment. Ignoring taxes for the moment, if you invest in year 0 at 4%, at the end of the year you have 1.04, and at the end of the following year you have 1.0816. It’s the .0016 that you can withdraw and use for risk capital.
It’s slow — this is a strategy followed over generations — way to preserve the approximate starting value of principal over time (that is the interest that accumulates is your time/inflation value protection), and at the same time to free up a little for risk-taking.
