The Week in Review -- July 23, 1999

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  7/16 Close 7/23 Close Change %Change
DJIA 11,209.53 10,910.96 -298.57 -2.66
S&P 500 1,418.78 1,356.94 -61.84 -4.36
Nasdaq 2,864.50 2,692.40 -172.10 -6.01

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Grasping a Million
by Jerry Thomas (tmfcheeze@aol.com)

Greetings, Fools.

We are used to thinking of one million as a very large number. In casual conversation we use that figure to represent any inconceivably large sum. "There must have been a million ants in my sleeping bag," you might say of an unpleasant night at summer camp. "I've got a million things to do," says your co-worker, declining your invitation to lunch. Naturally, we aren't actually referring literally to millions when we make such remarks, but these habits of conversation train us to think of that number as an incomprehensible figure, a number so large that it is beyond our capacity to understand it. The truth, however, is that a million is a far more graspable number than you might imagine. There are many examples of achievable millions all around you.

Take the Fool Message Boards, for instance. On July 2nd, our one-millionth post appeared there when registered Fool Arlene Poff made a simple earnest inquiry about a company that interested her. Surprise! It was her first post. One click of her "submit" button and Arlene made Foolish history. Now, we are naturally proud of our million posts, but as impressive as that number is, remember that it was achieved in less than two and a quarter years -- a very finite period of time in the scheme of things. In fact, I expect we'll hit two million posts before another year passes. So if a million is supposed to be so mind-bogglingly huge, how come the number was so easy to get to?

The answer, to borrow a phrase, is you have more than you think. Take another example: $20,000 growing at 10% -- less than the historical rate of return of the stock market this century -- will grow to a million dollars in value in a little over 41 years. Thus, armed with nothing more than an index fund and a few decades of patience, any Fool can become a millionaire with almost no effort, assuming that the economic growth the human race has been enjoying for centuries continues over the modest span of our lifetimes. Save more money earlier, or invest in ways that produce a better return sooner, and you can reach a million on a more ambitious timetable. For example, the Rule Breaker Portfolio, launched in August 1994 with $50,000 and an aggressive approach to picking stocks, is already well north of the half-million dollar mark.

I caution you that those Rule Breaker returns are extremely unusual, and it is not likely that most investors, even Fools, will match them. But the portfolio does represent the outer edge of what is possible. The point is, a million dollars, far from being a hopeless dream to the ordinary investor, is something extremely achievable if you start soon enough, if you give yourself plenty of time, and if you approach the task with patience and discipline. Take this concept out of the category marked "Impossible," and place it in the one marked "Foolish." Then begin now to learn the basics that will get you there.

Does the idea of a million still seem daunting to you? Does a million of anything sound like it would fill a warehouse? Guess again. This weekend, spend some time holding your Sunday newspaper on your lap. Get cozy, feel its weight and heft. Then, with a pair of scissors, snip out any three-letter word you might happen to find: an "and," a "but," a "the." If the Sunday paper represents your future million dollars, that one-eighth-inch square of paper is the equivalent of one one-millionth of the whole: one dollar.

Yes, it's tiny compared to the whole, but, surprisingly, it isn't microscopic. It's still big enough to contain a whole word. It's big enough to have meaning. Besides, as small as it is, it's only one dollar -- anyone working full time will see thousands and thousands of these valuable specks passing through his hands every single year. And a million of them, enough to sustain you comfortably for the rest of your life, is still so finite a number that it fits easily in your lap, tangible and manageable. It is an amount that is quite reasonable for you to have, because you already understand it. All you have to do is make the simple arrangements necessary to bring it into your life.

These Notes are styled as a Week in Review. It's my job, in part, to alert you to some of the cool features that have appeared on the Fool in the past few days. A week, however, is an insignificant time frame to a long-term investor, and it is usually helpful to look at things from a longer perspective. Well, you're in luck: on Thursday, we launched our Midyear Review, which brings you an overview of some of the more interesting developments of the past year: AT&T's struggles with broadband, the craziness of Internet stocks, and the strength of online banking and brokerages are just a few of the topics covered. You might also enjoy checking out this week's Dueling Fools feature on Priceline.com (Nasdaq: PCLN). This controversial stock has been all over the map since its debut earlier this year, and Rick Munarriz (TMF Edible) and Paul Larson (TMF Parlay) aren't afraid to confront each other in examining the key issues.

So between your summer barbecue and your weekend relaxation, spend some time this weekend thinking about your million. If you have children, check out our Investing for Kids area for information on how to make them rich -- with the expanse of their whole lives ahead of them, they are in an ideal position to take advantage of the best tool the long-term investor has: time. Your million and theirs are close at hand, if you make way for them.

Until next week,

Fool On!

Cheeze

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