The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!)

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 ...