I have already talked about investing in a house. As I indicated, there is no guarantee of an above-average rate of return for doing so. In Economics Today I point out that most, if not all, get-rich schemes should be shunned. Why? Think about it intuitively. We live in a competitive world. Almost everybody would like to make a higher-than-normal rate of return on his or her investments. If someone comes to you and offers you a get-rich scheme, you have to ask yourself why you are being offered this great benefit—the ability to make a higher-than-normal rate of return. The answer is typically that you are being offered that ability only if you are willing to take a higher-than-normal risk. Remember always:

There is a positive correlation between risk and rate of return.

I am sure you have seen some of the ads by self-professed, self-made multi-millionaires who offer, for a mere $19.95, to let you in on their secrets of instant success. Some of these ads may tell you that "You, too, can earn $60,000 a month without risking anything" or, "You, too, can learn to buy land with no money down and make yourself rich."

Dear Friend,
I made $9,800 in 24 hours. You may do better! I own four homes in Southern California. The one I am living in now in Beverly Hills is worth more than $1 million.

I know that throughout your life you will have well-meaning friends and relatives who will want to give you hot tips about stocks to buy, or companies to invest in, or businesses to start. You will be presented with schemes that surely can't fail and with investments that are too good to be true. My advice is that you step back and remember this basic course in economics in which you were taught that all the players in our economy are competing for scarce resources. The old saying, you get what you pay for, really has an economic basis. In a competitive world, if someone offers you free advice about how to get rich, that advice is worth just what you paid!

Always ask yourself the following question: If the deal is so good, why is the person telling me about it? Or you might ask yourself, "If the information is so valuable, why doesn't this person who is giving it to me simply use it, become a multi-billionaire, and not bother with people like me?" I have often wondered why stockbrokers, for example, can be so certain about the hot tips that they give their clients. If they are so certain, why are they still stockbrokers, instead of just super-rich investors?

Well, you may be saying to yourself right now, where does that leave me? How should I invest my hard-earned savings? There is no specific answer, but rather a general operating rule:

Diversify your assets