<THE FOOLISH FOUR>
by Robert Sheard
LEXINGTON, KY. (July 20, 1998) -- If you're anything like me, you fantasize about what your portfolio can grow to over time. But what I think most young Americans don't realize is that even if you have no portfolio yet, you've got something more important -- time.
Central among most of our retirement fantasies, of course, is the magic goal of $1 million. Not because a million is indicative of anything, but it's part of our culture that a millionaire is someone who's made it. Of course, a million today isn't nearly what it was thirty years ago, nor will it be what it is today thirty years hence, but for now it's a magical milestone those of us still on the small side of the number think about.
So what does it take to get there? Believe it or not, a lot less than you might think. You need three things really: $2,000 a year into a Roth IRA, 15% returns, and a few days more than 30 years. Of course, changing any of the those factors will change the calculus of getting to $1 million.
For the sake of our main example, though, let's take a 30-year-old investor, someone who should already have been saving but hasn't yet begun. If that investor does nothing more than put the $2,000 deposit into a Roth IRA every year and manages 15% returns (considerably below the Dow Approach returns for the last several decades), upon retirement at age 60, he'll have a million dollars ($999,914 to be precise).
Getting better returns shortens the time to the magic benchmark, of course. Saving more money in addition to the Roth IRA contributions will do the same. Or for really young investors, saving for a longer period makes a significant difference.
Regardless of whether you're starting from scratch or with a healthy savings portfolio, the real issue is that those investors who save regularly and invest sensibly (I'm not even talking about all-star stock pickers here) will meet some very exciting financial goals over the years. Don't be daunted by big numbers and lots of fast talking. Much to the Wise's dismay, investing doesn't have to be nearly as hard or nearly as time consuming as they'd have you believe. If you save regularly and invest in a good strategy or two (or even a handful of terrific companies you hold a long time), you're going to do yourself a world of good. The crucial factor, though, is getting started and not giving away your best advantage -- time. You'll get where you want to be with a little discipline and a chunk of time
Current Dow Order | 1998 Dow Returns
[Robert Sheard is the author of the The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and your local bookseller.]
07/17/98 Close
Stock Change Last -------------------- UK - 3/4 51.31 IP + 7/16 45.44 MO + 7/16 40.06 EK +1 3/4 88.19 |
Day Month Year
FOOL-4 +0.68% 6.90% 16.08%
DJIA -0.45% 3.84% 17.54%
S&P 500 -0.22% 4.43% 22.02%
NASDAQ +0.27% 6.31% 28.27%
Rec'd # Security In At Now Change
12/31/97 206 Eastman Ko 60.56 88.19 45.61%
12/31/97 291 Union Carb 42.94 51.31 19.51%
12/31/97 289 Int'l Pape 43.13 45.44 5.36%
12/31/97 276 Philip Mor 45.25 40.06 -11.46%
Rec'd # Security In At Value Change
12/31/97 206 Eastman Ko 12475.88 18166.63 $5690.75
12/31/97 291 Union Carb 12494.81 14931.94 $2437.13
12/31/97 289 Int'l Pape 12463.13 13131.44 $668.31
12/31/97 276 Philip Mor 12489.00 11057.25 -$1431.75
CASH $754.73
TOTAL $58041.98
|