The Daily Dow FOOL GLOBAL WIRE by Robert Sheard (TMF Sheard) LEXINGTON, KY. (Apr. 30, 1997) -- In yesterday's Foolish Four report, I discussed the need for regular savings and paying yourself first. And I included a hypothetical model to show how a simplified portfolio could grow with regular investments and an annual rate of growth of 20%. Of all the limbs I've crawled out on, this was the last one I expected to be sawed off behind me. Nevertheless, I received a number of e-mails, some mild, some outrageous, calling into question both my credibility and my sanity for using a growth rate of 20%. Well, call me crazy, but let me discuss my reasoning. As I mentioned yesterday, this hypothetical situation doesn't include any allowance for taxes, so I don't feel the need to cover that ground again. Make an allowance for taxes and let's move on. The big sticking point, though, was the 20% growth rate I assumed. Why 20%? Well, I like round numbers first of all. For hypothetical situations, they're easy to deal with. But I didn't just pull this out of thin air. The Foolish Four approach has averaged 22.91% a year for more than two-and-a-half decades, roughly the period I projected in my scenario. During that same period, the Dow 30 stocks (including dividends) have grown at 13.30%. That represents only about 1.3% a year more than the long-term average we've seen for the Dow for most of this century. The last 26 years, therefore, aren't anything so remarkable that we'll never see the likes of such returns again. By choosing 20%, then, I was working from a legitimate return that has been achieved by a simple and completely objective method we teach here in the forum. Now of course I can't say with certainty that the next 30 years will be identical to the last 30; I don't believe anyone reading my article would come away with sense that I made that prediction. But I don't see it as completely unreasonable to believe that the future will be roughly the same as the past. Actually, to assume that the market's somehow different from the way it's been for the past many decades is a more radical assumption than the one I made. All that said, the point of my piece yesterday remains valid, whether you can achieve a 10%, 15%, 20% or even 25% return. I simply used a number closely tied to the historical return recorded by the Foolish Four. We can debate endlessly whether that return is sustainable over the next several decades, but as long as you're saving the whole time, you're going to be in great shape. Anyone got a ladder? I hear someone sawing back there. (c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

The Current BTD 10 AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> *Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MO)") else Response.Write("(NYSE:MO)") end if %> *Intl. Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> * Goodyear Tire <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GT)") else Response.Write("(NYSE:GT)") end if %> * Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GM)") else Response.Write("(NYSE:GM)") end if %> Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %> Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") end if %> DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:DD)") else Response.Write("(NYSE:DD)") end if %> NOTE: Foolish four stocks are preceded by an asterisk. Updated Daily

1997 Foolish Four Model Stock Change Last -------------------- T + 3/8 33.50 GM + 1/2 57.88 CHV + 5/8 68.50 MMM + 1/8 87.00 Day Month Year FOOL-4 +0.80% -0.20% -4.48% DJIA +0.67% 6.46% 8.70% S&P 500 +0.92% 5.84% 8.18% NASDAQ +1.46% 3.20% -2.34% Rec'd # Security In At Now Change 1/2/97 153 Chevron 65.00 68.50 5.38% 1/2/97 120 3M 83.00 87.00 4.82% 1/2/97 179 Gen. Motor 55.75 57.88 3.81% 1/2/97 479 AT&T 41.75 33.50 -19.76% Rec'd # Security In At Value Change 1/2/97 153 Chevron 9945.00 10480.50 $535.50 1/2/97 120 3M 9960.00 10440.00 $480.00 1/2/97 179 Gen. Motor 9979.25 10359.63 $380.38 1/2/97 479 AT&T 19998.25 16046.50 -$3951.75 CASH $431.29 TOTAL $47757.92

© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us