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May 12, 1999

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Subject: Re: Majority Die Broke?
Author: piz

craigflannagan wrote:
I'm about to begin a lifetime of investing at age of 27...What alarmed me is that I saw some posts here saying that the vast majority die broke...Does the "majority who die broke" even attempt to invest like a Fool? Or does that majority just fail to educate themselves about the values of long term investing and using the market?

Hoo, boy! I could go on and on about this one. The regulars here and on the Workshop board don't want me to, though. ;-) So I won't; I'll try to keep it short:

The answer to your first question is no. The vast majority of people don't ever attempt to invest at all, let alone Foolishly. They just assume that only people who are already rich can afford to invest, and that somebody, somehow, will take care of them after they've spent a lifetime failing to provide for themselves.

This leads to the answer to your second question: because they think the rest of us owe them something (for example, that's what Social Security is: implementing via gummint force the notion that those who are working owe something to those who are not), and that somebody, somehow, is going to take care of them (whether those somebodies want to or not), they never bother to educate themselves, not just about financial matters, but about not much of anything else.

"The answer to your first question is no. The vast majority of people don't ever attempt to invest at all, let alone Foolishly. They just assume that only people who are already rich can afford to invest, and that somebody, somehow, will take care of them after they've spent a lifetime failing to provide for themselves."

My next door neighbors have nearly nothing in savings. They both work, and between them earn perhaps twice what my wife and I earn in a year. We were discussing IRAs one day, and one of them said, "Well, who has two thousand dollars laying around to put in an IRA?" I said nothing, but thought to myself, "Er, I do, because I make sure of it."

Another person I know very well has absolutely no savings, either. He claims his business is his retirement account, that one day he'll sell it and retire on the proceeds. His business has a gross annual revenue of about $500,000, net of nearly zero, and a book value of about $100,000, none of which have changed much in well over ten years. Given this track record and his apparent unconcern with pushing for growth, how much can he expect his business to be worth in the future? Still, he insists that he needs nothing else. Note that he graduated Magna Cum Laude from Georgetown and his business is writing portfolio and trade management software for large bond trading desks like Citibank, so he's neither stupid nor financially illiterate. Or is he?

These are just two examples; I'm sure others could come up with many more. It's not a pretty picture. And it really burns me up that one day all these people are going to be clamoring for a piece of my wealth, calling me "lucky," saying they "couldn't help it" and that I have to "give something back to those who have given me so much." Sorry, but it's work, not luck, they could have helped it if they had tried, and nobody "gives" me anything except in equal exchange of value for value.

OK, that's enough. :-)

Piz