Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Don't Make a Million-Dollar Mistake

In an earlier commentary, we ran the numbers and found that a 22-year-old with $20,000 could surpass the million-dollar mark by the time he was 62. Provided his portfolio only slightly outperformed the market's historical average and returned an annualized 11%, that growth would occur without our hypothetical investor kicking in a single additional penny.

Impressive, no?

Sure, but what if you're not 22 anymore? Not to worry: Even if you're older -- 42, say, rather than 22 -- and looking to play catch-up without that kind of money in the bank, you too can be a millionaire. Really.

Make a commitment
The first step is to commit to investing in the stock market systematically. Do everything you can to make it a no-brainer -- literally. After all, if you have to think each month about whether to send money to a brokerage account, chances are -- as with flossing your teeth or eating leafy green vegetables -- you'll opt to take a pass, at least on occasion.

My advice? Just don't do it.

With automatic investing, that's not even an option, which is one reason why participating in your employer's retirement plan is such a smart and Foolish move: The money comes out of your check before it hits your bank account, so you don't even have a chance to miss it.

Similarly, these days, fund companies make it as easy as pie to "dollar-cost average" into their funds. Dollar-cost averaging is just another name for automatic investing, and provided you've picked the right investment vehicle, letting your brokerage or fund company do all the work for you is the very definition of convenient.

Next step(s)
After you've made the all-important decision to invest on a regular basis, picking the right investments is the critical next step. Should you opt for racy growth stocks such as Celgene (Nasdaq: CELG  ) , eBay (Nasdaq: EBAY  ) , and Pinnacle Entertainment (NYSE: PNK  ) , each of which sports above-average earnings-growth estimates and price-to-earnings ratios?

Or maybe value-priced options like Cemex (NYSE: CX  ) , Halliburton (NYSE: HAL  ) , Qwest (NYSE: Q  ) , and Travelers (NYSE: TRV  ) -- stocks that currently clock in with single-digit P/Es -- are more your style. Another choice might be a portfolio of funds that includes a dirt cheap index tracker and a clutch of actively managed overachievers.

As the former lead analyst for the Fool's Champion Funds mutual fund newsletter, I'm obviously a big fan of that last approach. But no matter which path you settle on, the important point is this: Get going now. A 42-year-old who starts from scratch and kicks in $500 a month (and earns the same 11% we hypothesized above) will have more than $430,000 when he or she hits 62.

And obviously, the more the merrier: Sock away $15,500 each year in your company's 401(k) -- your contribution limit for the 2008 tax year -- and fund an IRA to the tune of five grand a year, and voila! At 11% annualized, your nest egg will grow to more than $1.4 million in 20 years.

Get started today
As I suggested in my earlier write-up, the short story is that time really can be on your side if you invest intelligently and shift into savings gear now. Whether you're just getting started with investing or are already a seasoned professional, all it takes is a good plan and a little discipline to get on the road toward becoming a millionaire.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 564700, ~/Articles/ArticleHandler.aspx, 10/23/2016 9:43:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
CELG $98.91 Down -1.11 -1.11%
Celgene CAPS Rating: *****
CX $9.14 Up +0.13 +1.44%
Cemex CAPS Rating: ***
EBAY $29.06 Up +0.04 +0.14%
eBay CAPS Rating: ****
HAL $48.43 Down -0.32 -0.66%
Halliburton CAPS Rating: ****
PNK $12.57 Down -0.05 -0.40%
Pinnacle Entertain… CAPS Rating: *
Q.DL2 $6.83 Down +0.00 +0.00%
Qwest Communicatio… CAPS Rating: **
TRV $108.35 Down -1.17 -1.07%
The Travelers Comp… CAPS Rating: *****