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How to Get Rich in Manhattan

I wrote earlier this year about how the smoking rate in America is dropping. That decline may get more pronounced soon, thanks to a big number of New York City smokers who are calling it quits. Why?

Well, you probably know that many states impose hefty taxes on packs of cigarettes, as do some cities. And with many local governments feeling a sizable financial pinch these days, some of those taxes are going up. New York State, for example, recently saw its state tax on cigarettes rise by $1.25 to $2.75 per pack. (That's an 83% increase!) Meanwhile, there's a New York City tax of $1.50 on a pack of smokes already. The upshot is that in New York City, a pack of cigarettes now often costs close to $10, with a full $4.25 going to state and city taxes.

Think about what this means to you, if you live on the Upper West Side and smoke a pack a day. That's around $3,500 per year, just for cigarettes! (Two packs a day will total $7,000 or more.) It should be clear now how you can get rich in Manhattan: Quit smoking!

Invest $3,500 per year in the stock market, and if you earn its historic average annual return of 10%, you'll end up with around $200,000 in 20 years. In 25 years, that turns into nearly $345,000 -- just by not smoking! Plus, you may live longer, and thereby be able to enjoy your money more.

Earn even more
Investing in top-flight mutual funds can help you do even better than the market average. (As my colleague Rich Greifner has noted, mutual funds are the "Best. Investments. Ever.")

One example of a fund that's done well lately is the Bridgeway Aggressive Investors 1 (FUND: BRAGX  ) fund, sporting a five-year average annual return of nearly 16%. Its top holdings recently included a mix of high-flying stocks and beaten-down value plays, including Freeport-McMoRan (NYSE: FCX  ) , Pfizer (NYSE: PFE  ) , Bristol-Myers Squibb (NYSE: BMY  ) , Oracle (Nasdaq: ORCL  ) , and Deckers Outdoors (Nasdaq: DECK  ) . At 16%, you would accumulate nearly $875,000 in 25 years.

Bridgeway is closed to new investors, but if you want to see funds providing similar performance, take a free trial of our Motley Fool Champion Funds newsletter service. Its recommendations have been beating the market by an average of more than 20 percentage points. A free trial will let you access all past issues and all recommended funds.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Pfizer is a Motley Fool Income Investor and Motley Fool Inside Value recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.

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