In earlier commentaries, we've shown just how easy it is to make a million bucks. Provided you've got the discipline to sock away the savings -- and the time to let compound interest work its magic -- you, too, can be a millionaire. Indeed, $500 plunked down monthly in a mere index tracker -- such as the dirt cheap SPDRs (SPY) exchange-traded fund -- will grow to a million bucks in just less than 28 years, if the market delivers its historical return of 10.5%.
But what if you want to shoot higher and amass, say, $2 million? Is that just a matter of time and gumption, too?
Not exactly. The bigger the goal, the more critical it is to get your plan right and spring into action posthaste. If you have the stomach for volatility and the wherewithal to put financial independence on the front burner, you can reach your lofty goals. Here's how.
Go growth
Value investing has been all the rage for so long now that it's hard to blame investors -- particularly newbies -- who have come to believe that it's destined to be that way forever. However, growth and value are relative terms, and these days, it's possible to snap up shares of stocks with double-digit earnings growth forecasts on the relative cheap. Google (NASDAQ:GOOG) and Research In Motion (NASDAQ:RIMM), for example, fit that profile, as do Amazon.com (NASDAQ:AMZN) and Time Warner (NYSE:TWX): All clock in with stock prices more than 25% below their 52-week high-water marks.
Add eBay (NASDAQ:EBAY), Apple (NASDAQ:AAPL), and Southwestern Energy (NYSE:SWN) to that list and then add up these numbers: Taken together for the 10 years that ended with August, these three stocks have delivered an annualized average return of 32.5%. Pick winners like that, and at a comparable rate of return, your journey to Two Millionaire Acres would take roughly 15 years on the $500-a-month plan. Talk about making good time.
The Foolish bottom line
It really is true that past performance is no guarantee of future results. The broad point, though, is well worth remembering: Greater risk -- in the form of stocks with earnings growth prospects that make 'em more susceptible to the market willies -- can lead to greater returns over the long haul.
Plus, there are ways of mitigating that risk. Mutual funds come to mind, as does assembling a portfolio that provides exposure to defensive, "capital preservation" plays along with racier growth stocks.
As it happens, we've covered all those investment types -- and made specific recommendations -- at Ready-Made Millionaire, the Foolish investing service designed with busy investors in search of a set-and-forget wealth-building solution. Our compact lineup of just eight holdings -- four highly profitable companies, a high-octane ETF, and a power-trio of world-class mutual funds -- is backed by a million dollars of the Fool's own money. Our mission: to trounce the market over the long haul with little in the way of muss or fuss.
If that kind of get-it-done approach to your investing life sounds like your cup of tea, we invite you to learn more about the service and pick up a free copy of The 11-Minute Millionaire, a special report designed to help you navigate today's volatile markets. Click here to download your copy -- and stay tuned: RMM will reopen to new members next month, and we'll let you know just as soon as that occurs.
This article was first published on March 8, 2007. It has been updated.
Shannon Zimmerman runs point on the Fool's Ready-Made Millionaire. At the time of publication, he didn't own any of the securities mentioned above. Apple, eBay, and Amazon.com are Motley Fool Stock Advisor recommendations. Google is a Rule Breakers choice. You can check out the Fool's strict disclosure policy by clicking right here.
