The most dangerous myth out there right now is that Treasuries are the key to safe wealth building.
Forget about Fed Chairman Ben Benanke's latest palliative.
This misconception will turn your nest egg into a pile of sticks faster than you can say quantitative easing.
And this is a huge problem because the baby boomers are starting to retire in droves.
I call this the Great Retirement Funding Crisis. And I am determined not to be a part of it. And I have a plan.
Over the next 15 years, over 70 million Americans – over one-third of the adult population – will reach retirement age, but most of these folks have nowhere near the amount of funds it takes to retire comfortably.
What's even more troublesome is the fact that nearly half of those soon-to-retire have not even thought about how much it will take to finance a comfortable retirement.
And when I talk about retirement, I'm talking about financial independence.
Right now, safe investing is turned on its head and you need adapt or put at risk all you've have working for you.
Beyond Wealth Preservation
Over the years I have derived two simple but important axioms that guide my investing:
1. Even if you're rich, wealth, if not replenished, will run out. If you're not rich, growing your funds is even more important.
2. If you can get rich and know how to make wealth grow, then you can truly be financially independent.
My work at hedge funds and inside Wall Street powerhouse Goldman Sachs reinforced my view of wealth building versus wealth preservation.
And as the saying goes, I learned not to "fight the tape;" I learned to make money with the market regardless of what it threw at me.
For example, I made a very nice return from technology stock investing in the 1990s. And I continued to make money between 2000-02 even though the NASDAQ declined 70 percent. I was able to do this because I listened to the markets and I changed my strategy when the market changed.
It's Never Too Late
The key to investing and business success is the ability to identify favorable risk-reward situations. I only invest when the upside potential outweighs the potential risks.
For instance, when investing in growth stocks, I usually limit downside risk by cutting losses quickly and letting profits run when big winners emerge.
On the other hand, when buying value stocks, getting them on the cheap mitigates some downside risk by buying them at low valuations.
The point is that there needs to be enough potential profit in the game to justify risking your capital. If the potential pay-off in an investment is low, then it makes no sense to invest in it if any downside volatility exists.
And the current poster child for this kind of investment now is the long-term U.S. Treasury bonds in the current super-low but rising interest rate environment.
Long-term Treasuries – A Bad Bet
Treasury bonds are widely perceived as a "safe" investment because of their extremely low default risk.