The Lure of Great Wealth

One of the most popular articles on The New York Times website at one time was "The Gilded Cage: Lure of Great Wealth Affects Career Choices."

I can guess why it was so widely read and shared. It promises at once to offer an answer to the question of "How do I get rich?" -- the second-most popular question in the history of humankind, next to: "What's for dinner?" And it offers solace for those not in the "great wealth" category.

Many who pursue wealth, and are successful at it, do live in a gilded cage. They're trapped in a partially unfulfilling life because they've traded doing what they'd really love to do for the sake of a bigger paycheck.

Get rich easier
That's too bad because truly significant wealth is achievable for anyone in our society who has these three things:

  1. Employment in a job they truly like and that challenges them.
  2. Sufficient discipline with their savings.
  3. A sound investment plan.

I don't know what constitutes great wealth in the minds of most people, but I guess eight figures -- at least $10 million -- would qualify for some. How do you get there with a savings and investing plan, and with the job you love, from a standing start of $0?

Do you have to take great risks with your savings? Do you try to decide whether Level 3 Communications (Nasdaq: LVLT  ) or Vonage will turn huge losses into profits? Or whether sub-$4 stocks such as Sycamore Networks (Nasdaq: SCMR  ) or Charter Communications can turn around years of miscues and return to past glories, despite steep competition in fast-moving landscapes?

You don't need to.

The market's best returns
Although large-cap growth companies with volatile stocks and uncertain futures get all the press in the world, history shows they're not the best stocks to help individual investors earn great wealth. Compare the historical returns of large-cap growth stocks -- which include results of long-term monsters such as United Parcel Service (NYSE: UPS  ) , McDonald's (NYSE: MCD  ) and Kohl's (NYSE: KSS  ) -- with those of the total stock market and of small-cap value stocks from 1927 to 2005:

Large-cap growth

9.5%

Total stock market

10%

Small-cap value

15.4%

What does 15.4% compound to over a lifetime spent working in a job you love? If you were simply to maximize your IRA contributions (currently $4,000 a year) and 401(k) contributions (currently $15,000) over a 40-year working life span, from a standing start of $0, you'd have $37 million at the end. Does that qualify as great wealth?

The Foolish final word
Figures like that should tempt you to change your behaviors. But don't be tempted to trade doing what you love for 10, 12, or 14 hours a day of gilded-cage riches and no time for your friends and family.

Instead, consider learning more about small-cap value stocks. Our newsletter, Motley Fool Hidden Gems, follows small-cap companies. Take a free, 30-day guest pass to Hidden Gems to learn about how we chose the 40 currently recommended companies that have produced an early start to great wealth.

And keep the job you love for life.

The article was originally published on Nov. 30, 2006. It has been updated.

Bill Barker does not own any companies mentioned in this article. UPS is an Income Investor recommendation. The Motley Fool has a disclosure policy.


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