<THE FOOLISH FOUR>

A Buck a Day
by Robert Sheard

LEXINGTON, KY. (August 13, 1998) -- Maybe it's a sign of getting old. Maybe it's just the human condition that we long to go back to our youth armed with what we know now. But every time I look at the amazing power of compounded growth I envy children and their biggest ally -- time.

Imagine never having to invest more than a dollar a day and still having the opportunity to become a millionaire long before retirement age. And yet that's possible under even very modest circumstances.

If you're young and start stashing a dollar a day into a piggy bank (forget interest on the daily buck for now), let's look at the potential for growth from even this most basic of plans.

Set up a Roth IRA as soon as you're eligible. Plunk your annual $365 into it (more if you can, of course), and let's see what happens. Since the Roth IRA has no tax consequences after the money's deposited, we can compound the growth with a simple return rate. Let's assume 17%, which is the basic return over the last several decades for the Dow Dividend Approaches.

If you keep this up, year after year depositing the piggy bank proceeds from the previous year, after ten years of compounding, the amount grows to $9,563. Keep it up for another decade and it grows to $55,531.

After thirty years? $276,489.

And after 40 years? $1,338,598.

Now as you're aware, inflation is going to reduce the value of that "millionaire's" status considerably, but surely the advance of your career is going to allow you to save more than a dollar a day over the next four decades? Each increase in the savings rate is just going to grow geometrically and increase that retirement target.

Come on, young people. No excuses. Give up a buck a day and look where it'll take you. Ah to be 16 again and starting my first job!

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.]

08/13/98 Close
Stock  Change   Last 
 -------------------- 
 UK   +   3/16  47.50 
 IP   -   1/16  43.06 
 MO   -  11/16  41.38 
 EK   +   9/16  82.38 
  
 
 
                    Day   Month    Year 
         FOOL-4   -0.07%  -2.77%  10.82% 
         DJIA     -1.09%  -4.77%   6.97% 
         S&P 500  -0.86%  -4.08%  10.77% 
         NASDAQ   -1.26%  -3.73%  14.78% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  206 Eastman Ko    60.56     82.38    36.02% 
  12/31/97  291 Union Carb    42.94     47.50    10.63% 
  12/31/97  289 Int'l Pape    43.13     43.06    -0.14% 
  12/31/97  276 Philip Mor    45.25     41.38    -8.56% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  206 Eastman Ko 12475.88  16969.25  $4493.38 
  12/31/97  291 Union Carb 12494.81  13822.50  $1327.69 
  12/31/97  289 Int'l Pape 12463.13  12445.06   -$18.06 
  12/31/97  276 Philip Mor 12489.00  11419.50 -$1069.50 
  
  
                              CASH    $754.73 
                             TOTAL  $55411.04