A Simple Move You May Have Missed

Here we are in April once again, and just like every other April, it seems like too many people are missing out on a big opportunity -- a simple move that could have a profound effect on your future wealth. In fact --

Knock it off, will you? You're already giving me a headache.

What? I'm trying to tell folks about --

I know what you're trying to tell folks about. It's the IRA thing again. Blah blah blah taxes blah. You do this every spring. You think I haven't wised up by now?

I don't know. Have you made your IRA investment for 2009?

Naah, this IRA stuff is too much of a pain for me. You know that.

Then apparently you haven't wised up. Listen: Opening an IRA at a discount broker and funding it every year is one of the best ways to build wealth over time. But too many people don't do it -- they can't find the money, or they can't find the time, or they say they'll do it next year, or they forget, or they say --

It's too hard. Hush up, will you? I'm trying to watch TV here. You know I love Wheel of Fortune.

But it doesn't have to be hard. It's only hard if you make it hard.

Wow, Vanna looks great, doesn't she? How old do you think she is now?

I have no idea. Fifty-ish? But listen, forget Vanna for a minute. I don't think she needs retirement investing advice. But you do.

OK, fine. Look, the reason I don't do the IRA thing is because all of the investments have stunk for years. Look at the 10-year average returns on these mutual funds -- 3%, 5%, here's one that managed 8%. Whoop-de-do. It just doesn't seem like the tax advantage is worth the hassle when the returns are so puny.

So forget mutual funds. Buy stocks instead.

Who has time for that? You Fools are always going on about how people need to know their investments and look for opportunities in places Wall Street doesn't, but those Wall Street banks have huge departments full of MBAs looking everywhere on Earth for little tiny bits of value or whatever. I don't have time to try to compete with those blue-suit guys, even if I could.

I'm telling you, it's not worth my time.

But you don't have to compete with those guys. That's the point I've been trying to make. You can do really well in an IRA with just a few big stocks. An IRA is a great place to hold stocks that pay good dividends because you don't have to go pay taxes on that income every year. If you reinvest them, they can really pile up over time.

But finding those stocks takes tons of time. And then I have to fuss over them, reading every little 8-K filing or whatever so that they don't blow up on me. I can't deal with that.

So pick big-name stocks with a track record of success. I'll even help you out: Here's a bunch that have raised their dividends every single year for 25 years or more and have four- or five-star CAPS ratings, so they're pretty good bets to keep doing well. You're what, about 20 years from retirement?

Yeah, me and Vanna both.

So I'll also show you what $1,000 invested in each of them would have done over the last 20 years. Take a look:

Source: Yahoo! Finance, Motley Fool CAPS.
Hypothetical $1,000 investment from 4/12/1990 through market close on 4/9/2010 includes reinvestment of dividends.

That's cool the way you can speak in charts. Did you have to go to a special school to learn to do that?

It's a minor talent. Just look at the numbers: $7,000 split among these companies' stocks 20 years ago would have turned into almost $100,000 by now. If you'd stuck with that 8% mutual fund of yours, you'd have less than a third of that. That's the power of reinvested dividends, plus steady appreciation over time, minus all the fees you pay on that fund. And doing this in an IRA frees you of the tax hassles that can come with dividends. Really, it's pretty simple.

Hm. Yeah, that doesn't look so hard.

And there are plenty of other stocks that would have given you results like these. You don't need to go crazy looking under rocks to do well in the stock market. Certainly better than you're doing now. And with a discount broker, it's all online and the fees are low.

OK, I'm sold. What do I do now?

Get yourself over to the Fool's excellent (and free) IRA Center, where you'll learn about the different kinds of IRAs and the easy way to open one. It only takes a few minutes to get started. But remember, if you want it to count for 2009, you need to get it done soon -- April 15th is just a few days away.

Want another great wealth-building idea? Dan Caplinger has the scoop on an amazing opportunity.