Sock away $20 a day, every day, and you'll very likely wind up a millionaire.
Not by stuffing it under your mattress, though. Twenty bucks a day under your mattress would give you a million bucks ... after more than 135 years.
That's double the normal retirement age!
If you want a reasonable chance of amassing that kind of wealth in a normal time frame, you must invest -- and how you invest may make all the difference.
Ten-year Treasury notes recently offered a 4.16% yield. Investing your daily $20 in those bonds instead of your mattress would get you to millionaire status in just under 46 years. Not bad.
Agree to take on a bit more volatility, though, and you can position yourself to do even better than that. Over the long haul, the stock market has historically returned an average of approximately 10% to 11% annually. If that keeps up, investing in a low-cost market index tracker like Fidelity Spartan 500 Index
It gets interesting, though, if you're investing using a strategy that has a legitimate chance to beat the market. If, over the long haul, you outpaced Wall Street's averages by a mere two percentage points a year, a million bucks would be yours in a shade over 23 years.
That's a big "if"
Of course, very few investors have reliably outperformed the market over timespans measured in decades. Those who have often reach legendary status, such as Warren Buffett, John Neff, Walter Schloss, Peter Lynch, and Charles Munger. That's exclusive company.
While you and I may never achieve the tremendous level of returns that these masters have earned, their stories show that the market can and has been beaten.
Don't worry, get rich
Regardless of whether you'd like to try to trounce Wall Street or just keep pace with the market, the takeaway is still the same: To amass comfortable wealth in a reasonable time frame, you must own stocks or stock funds.
If you're going the individual stock route, there is some good news. You don't need to be invested in unfamiliar places to make money over the long haul. With many well-known and well-loved companies currently trading at decent prices, you can buy the names you know and still end up doing just fine. Perhaps you've heard of a few of these businesses:
|
Company |
Global |
10-Year |
|---|---|---|
|
Honda |
19 |
8.5% |
|
Axa |
49 |
11.5% |
|
Dell |
31 |
10.5% |
|
Nike |
29 |
11.2% |
|
Harley-Davidson |
45 |
14.1% |
|
Royal Dutch Shell |
93 |
9.4% |
Every one of those companies is a powerhouse with decent long-term prospects. None is likely to double overnight. Then again, they're not exactly at a high risk of falling off the face of the Earth in the next week, either. And as you can see, they've all made money for their investors. By turning in at least a 7.2% annualized return, they've helped people more than double their stakes in a decade. Not too shabby for some of the biggest names around.
Get started now
Of course, there's a catch. If you really want a shot at becoming a millionaire on $20 a day, you have to come up with that cash to invest. The toughest part might be finding that much money every day for the next few decades. That's where my friends at Motley Fool Green Light can help. Advisors Dayana Yochim and Robert Brokamp help you find the hidden fortune in every paycheck. You can take 30 days to tour the service, absolutely free.
If you look hard enough, you can uncover money you didn't even know you had. Once you find it and put it to work for you, watching your fortune develop is mostly a matter of time.
This article was originally published Nov. 3, 2006. It has been updated.
At the time of publication, Fool contributor Chuck Saletta owned no companies mentioned, but his wife owned shares Harley-Davidson. Dell is a Motley Fool Inside Value and Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.
