FOOLISH FOUR PORTFOLIO

Friday, December 12, 1997


The Daily Dow
by Robert Sheard

LEXINGTON, KY. (Dec. 12, 1997) -- As time passes, the typical American dream of becoming a millionaire means less because of inflation, but it's still a worthy target for most of us. After all, if you have a portfolio worth $1 million, an average year in the stock market is going to earn you a "salary" of more than $100,000 (based on the S&P 500's long-term history).

Just what does it take to get there from here? Time, of course, but perhaps not as much time as you may fear. Let's start with a couple of assumptions to make this model easy. First, let's assume the growth is occurring tax-free in a new Roth IRA. Second, let's assume an average long-term growth rate of 18.11% (the compound return for the four-stock Unemotional Value approach since 1961).

If you begin from scratch in January and add $2,000 a year into your new Roth IRA earning 18.11% a year, you would pass the million-dollar mark by the end of your 27th year (the end of 2024). And this, of course, doesn't count any future savings in addition to your Roth IRA or any savings you already have invested now. Twenty-seven years doesn't sound so bad, does it? Heck, some of us spent half that much time in college. (Don't ask.)

If you're starting at a young age, you might still be in the prime of your career when you ring the millionaire's gong. If so, the real fun of compounding will just be getting started. If you're just getting out of college (on the four-year plan, mind you), you could hit the $1 million mark before you celebrate your fiftieth birthday.

So, let's carry this projection an additional ten years. At the end of 2034, after 37 years of this plan, you'd be sitting on a pile 6.2 million bills high. (Don't forget that under the current laws, all of this growth in a Roth IRA is completely tax free.)

Given time, you can get there from here. Add in company 401k plans and taxable portfolios you fund over the years and there's little reason for any youngster out there not to retire well. (I can't believe I just wrote "youngster." You'd think I was already on my rocking chair on the porch.)

Have a Foolish weekend and keep the real goal in sight: not this year or next, but decades from now, when you're rocking on the porch.

Note: Sears (NYSE: S) slipped to number 11 on the high-yield list and thus, out of our current rankings. DuPont (NYSE: DD) regained a spot among the group. For complete rankings of all 30 stocks, visit the Current Dow Order file in our Dow Statistics Center.


TODAY'S NUMBERS
Stock  Change   Last
--------------------
T    +   7/16  57.63
GM   -   3/4   62.50
CHV  -2  1/16  75.50
MMM  -   1/2   92.38
           
                  Day   Month    Year
        FOOL-4   -0.48%  -0.33%  25.67%
        DJIA     -0.14%   0.19%  21.56%
        S&P 500  -0.16%  -0.21%  28.71%
        NASDAQ   -1.41%  -4.00%  19.02%

    Rec'd   #  Security     In At       Now    Change

   1/2/97  479 AT&T          41.75     57.63    38.02%
   1/2/97  153 Chevron       65.00     75.50    16.15%
   1/2/97  179 Gen. Motor    55.75     62.50    12.11%
   1/2/97  120 3M            83.00     92.38    11.30%


    Rec'd   #  Security     In At     Value    Change

   1/2/97  479 AT&T       19998.25  27602.38  $7604.13
   1/2/97  153 Chevron     9945.00  11551.50  $1606.50
   1/2/97  179 Gen. Motor  9979.25  11187.50  $1208.25
   1/2/97  120 3M          9960.00  11085.00  $1125.00