1 Wealth-Building Tip Andrew Carnegie Never Uttered

One of the wealthiest men in U.S. history was remarkably unconservative.

Jan 9, 2014 at 8:30PM

The StressTest column appears every Thursday on Fool.com. Check back weekly, and follow @TMFStressTest.

If you want to figure out how to build riches, one smart approach is to study those that have done it before you. And while Andrew Carnegie was many things, a very wealthy man was certainly one of them.

Because of the philanthropy and peace efforts of his later years -- when he liked to say things like, "the secret of happiness is renunciation" -- it may be easy to overlook the ruthlessness of his early years as he built that wealth. 

In the coverage of Carnegie's prime wealth-building years in David Nasaw's biography of him, there was one thing in particular that jumped out at me as missing. Specifically, I never heard Carnegie saying anything resembling:

Carnegie No Quote

In fact, it was very much the opposite. Carnegie loved collecting dividends, but in his formative years, he reinvested those dividends practically as fast as he could cash them. 

Carnegie himself is known for admitting that he "was apparently something of a daredevil now and then to the manufacturing fathers of Pittsburgh."

The tycoon is likewise known for saying:

Carnegie Quote

They're interesting thoughts to consider as we head into 2014 after a near-30% gain in the S&P 500 (SNPINDEX:^GSPC) for past year.

Obviously these two ideas -- putting your money to work as opposed to leaving it on the sidelines and concentrating your investing -- aren't going to be right for everyone all the time. But at the moment, we're being flooded with commentary that would seemingly prefer that if you put your money in any basket, it would be one secured with a padlock and stashed under your bed.

These headlines from the past few weeks clearly tell that story:

  • "Are We In a Stock Bubble?" (Bloomberg)

  • "Best stock market since '90s. Is it a 'bubble'?" (Christian Science Monitor)

  • "Here's Why The Stock Market Bubble Deniers Are Completely Wrong" (Forbes)

In the face of that, why should you bother investing today?

For one, investing is about the long term.

Over the past 10 years, we saw one of the worst financial crises since the Great Depression, and yet the S&P 500 doubled. Go back 20 years, and we have a period that included the financial crisis and the bust of the dot-com bubble -- which was a real stock bubble -- and yet the S&P has more than quadrupled over that time frame.

Carnegie built his massive wealth on the growth and transformation of the country. The growth and transformation looks different today, but it's still taking place, and still creating wealth for those who are participating.

Plus, here's what your money looks like on the sidelines:

Disappearing Dollar

Source: Bureau of Labor Statistics.

That's right, while the S&P was busy quadrupling over the past two decades, a dollar sitting on the sidelines ended up worth just north of $0.60.

Being fully invested and concentrating on your investments -- which I'd argue could mean concentrating them in a low-cost index fund -- are two thoughts that many people associate with high risk. If we look back at the data over the past 20 years, though, it would seem that the real risk was in doing exactly the opposite.

More wealth-building wisdom from the wealthy
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Matt Koppenheffer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information