What is the 70/30 Rule?

The 70/30 rule that is touted by Warren Buffet as a rule that states that one’s investments should be split 70/30 when they are saving for retirement. This means that 70% of the funds that are saved should be invested in bonds and 30% should be invested in stocks. The reason for this is that stocks are risky. Stocks can cause you to lose all the money you invest if they fail or go bankrupt. To protect your money, the advice is to not invest more than you are willing to lose.

A great example of the reason that you never invest more than 30% of your savings in stock is 2008. In 2008, Buffett himself lost about $23 billion through the crisis that saw the stock markets tank. Moreover, be informed of your decision on which stocks to invest in and don’t just make empty investments. It is foolish as gambling with your money.

Warren Buffet states this from lessons that he learned through investing and losing money when the stock market did poorly. He believes that stocks have their place in any savings portfolio as over time they provide a higher return on one’s money than other forms of saving, however, they present a greater risk, so investing must be limited to the money you are willing to lose. Don’t invest more than you are willing to lose. Moreover, it’s a rule he has always implemented into his investments, and it’s made him one of the most successful investors of our time. If it worked for him, give it a try as a rule that you should live by and it just might work for you!

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