
To
get rich on this
road,
you must own
stocks,
prettymuch
a/ways.
The
Road
More
Traveled
1185
Here's an eye-opener if you don't think you can save that much.
Figure what you're saving and see where you'll be after 30 years.
Suppose last year you saved $2,000. Solving for
[uture value (you're
a pro at these by now):
PMT
x ([(1 + i)n -
1]//)
=
FV
You promise yourself you'll save more next year.
"Will
you? Use
the previous assumptions for
i and n. Your
PMT
(amount saved
each year) is $2,000:
$2000 x ([(1
+
10%)30
-
1]/10%)
= $328,988.05
Saving $2,000 gets you to $329,000
-kicki
ng off about $13,000
a year in 30 years (about $6,150 in 2008 dollars).
That
's no road
to riches.
GET
A
GOOD
RATE
OF
RETURN
(BUY
STOCKS)
We keep using 10 percent as our assumed return. Fact is few folks
do that well. Most
projessionals
don't, even though it's
not
hard.
How
can you?
Easy-invest
in stocks, pretty much all the time.
Diversify globally, using something like the MSCI World Index or
ACWI
Index as your guide (www.mscibarra.com). While you must
be sure
of
your goals, time horizon, and cash flow needs, I am a
huge fan of stocks because they have superior long-term returns.
An all-equity approach is wrong for people
with short time horizons. But that's
not
you
on this road. T his chapter, by definition,
means you have a long growth goal and need
stocks. Almost always.
There
may be times when, to sidestep an upcoming prolonged
market downturn, you step into cash and bonds
-that ...