The Daily Dow
Wednesday, October 8, 1997
by Robert Sheard

LEXINGTON, KY (Oct. 8, 1997) -- I devote a large number of my Foolish Four columns to the issue of compound growth, and with good reason. For readers new to investing on their own, it can be a seminal lesson when first exposed to the result of time's magic on the growth of their portfolios. But what I don't spend enough time on, perhaps, is how ongoing savings make that magic all the more impressive.

Let's look at basic compounded growth first. Sarah decides to open a new tax-free Roth IRA next year with a $2,000 contribution, using the juiced Unemotional Value Four approach. Since 1961, this approach has returned 19.35% annually, so we'll use that 36-year growth rate as our future estimated return.

If she fails to add another penny, achieving this return annually over the next 35 years would expand her initial $2,000 to $976,821. Not bad for a strategy that calls for 30 minutes of work a year.

But even that amazing retirement fund will pale in comparison to Sarah's neighbor's account. Carmen also uses the Unemotional Value strategy in her Roth IRA, but she continues to save every year, adding a new $2,000 each time she adjusts her annual holdings.

At the end of 35 years, assuming the same investments, the same returns, the same tax-free growth, Carmen's retirement account swells to more than six times Sarah's already impressive account. (Carmen's account would be worth $6,012,653.)

So even if you're investing Foolishly, don't cheat yourself by overlooking the massive added power available from regular savings. There's no excuse for each of us not retiring wealthy. Given time enough, each of us has the opportunity to build impressive wealth, but the real beauty is that it's not at all difficult. Sit down and examine your personal financial situation and then map out where you could be at retirement if you follow a few simple principles. It's mind-boggling.

--Start now. (The earlier the better because of the magic power of compounded growth.)

--Take advantage of tax-deferred and tax-free investment accounts first.

--Save regularly. (Take 10% of your take-home pay off the top of each paycheck and have it sent directly to your stock account. You won't miss it after a month or two and you'll all but guarantee yourself a wealthy retirement.)

--Invest Foolishly for long-term growth. (Be patient; you'll get there.)

Fool on!

(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. ________________________________


1997 Foolish Four Model
Stock  Change   Last
--------------------
T    +1        46.50
GM   -   1/8   68.31
CHV  -1  1/8   87.56
MMM  -   3/4   98.25

           Day   Month    Year
                  Day   Month   Year
        FOOL-4   +0.32%   4.77%  21.71%
        DJIA     -1.02%   1.89%  25.54%
        S&P 500  -0.94%   2.80%  31.47%
        NASDAQ   +0.26%   3.33%  34.91%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     87.56    34.71%
   1/2/97  179 Gen. Motor    55.75     68.31    22.53%
   1/2/97  120 3M            83.00     98.25    18.37%
   1/2/97  479 AT&T          41.75     46.50    11.38%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  13397.06  $3452.06
   1/2/97  479 AT&T       19998.25  22273.50  $2275.25
   1/2/97  179 Gen. Motor  9979.25  12227.94  $2248.69
   1/2/97  120 3M          9960.00  11790.00  $1830.00


                             CASH   $1167.51
                            TOTAL  $60856.01