<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (Jan. 20, 1998) -- As the father of a youngster (five years going on twenty), long-term plans are usually on my mind. So let's look at a scenario today that I find astounding.

The day your new child is born, you've decided to forego that extra night out each month (not like you'd have the energy anyhow) and you'll take the $40 you'd have spent on dinner and the movies and sock it away for Junior.

To make things easy, let's assume that you're going to achieve a steady return of 15% a year, whether that's in a Dow Approach or some kind of a DRiP portfolio, and that you've found a way of doing this tax free. (Hey, it's the amazing power of time I want to show off, so don't get nit-picky on all the what-ifs.) That 15% return comes out to 1.25% a month.

So, on the first day of each month, $40 gets put into your favorite stocks and time takes over. At the end of the first year you'd have deposited $480, which has grown to $521. Not very exciting, is it? But give it some time.

On your child's 10th birthday, your fund has grown to $11,146. Now we're cooking.

On your child's 18th birthday, as you pack his suitcases and send Junior off to college, your fund is now up to $44,170. Remember, you're still just putting away $40 each month. Yes, inflation will eat into the buying power, but if we're going to assume inflation eats up one part of our model, we'd have to allow that you'd be putting away more than $40 a month by this time, too. So, let's stick with the easy route.

Hooray for Junior. That 300-yard drive and deft putting touch earned him a scholarship to college, so you don't have to drain your fund to pay tuition. You've decided to keep funding it until Junior graduates and then he's on his own.

After graduation, Junior starts making the monthly $40 contributions and by his 30th birthday, the fund you started is up to $280,393.

Zoom ahead as Junior becomes a respected member of the community (well, you can hope anyway). At age 40, the fund is up to $1,256,150.

At age 50, it's up to $5,588,721.

And when Junior has his own grandchildren and retires at age 60? Come on, Junior! Dance! $24,826,260.

That's right, from birth to retirement, $40 a month at 15% growth per year can get you from a big dream to $24.8 million. Something to think about, parents, the next time you fork out for a lousy flick and a mediocre dinner. Your indigestion and 90 minutes of middling entertainment might be worth nearly $25 million someday. Do you really want to see Police Academy 12 that badly?

[Want to be the first Fool on your block to get a copy of Robert Sheard's forthcoming book? Click here to pre-order your copy of The Unemotional Investor.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   +   7/16  41.19 
 IP   +2  7/16  45.94 
 MO   -1  9/16  43.63 
 EK   +1  1/2   60.44 
 
            
                    Day   Month    Year 
         FOOL-4   +1.44%  -0.34%  -0.34% 
         DJIA     +1.54%  -0.44%  -0.44% 
         S&P 500  +1.78%   0.84%   0.84% 
         NASDAQ   +1.74%   1.26%   1.26% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  289 Int'l Pape    43.13     45.94     6.52% 
  12/31/97  206 Eastman Ko    60.56     60.44    -0.21% 
  12/31/97  276 Philip Mor    45.25     43.63    -3.59% 
  12/31/97  291 Union Carb    42.94     41.19    -4.08% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  289 Int'l Pape 12463.13  13275.94   $812.81 
  12/31/97  206 Eastman Ko 12475.88  12450.13   -$25.75 
  12/31/97  276 Philip Mor 12489.00  12040.50  -$448.50 
  12/31/97  291 Union Carb 12494.81  11985.56  -$509.25 
  
  
                              CASH     $77.19 
                             TOTAL  $49829.32