Newspaper Page Text
6
How to turn 100 dollars
into a six-figure nest egg
You don’t have to be
rich to invest, but you
do need a little know
how. Here are a few
tips on how to grow
your income.
ith allthe money ad
vice you hear these
days, it's sometimes
difficult, if not im
possible, to make critical
choices that will secure your
quality of life during those
golden years. If you haven’t
given retirement a second
thought, consider this: Let’s
say you put away a mere SIOO
each month starting today. In
25 years, you would have a six
figure account waiting for you,
if you know how to work it.
The sooner you start, the more
you'll be able to take advan
tage of the single most power
ful investment weapon there
is: time.
Face it. No one understands
your financial situation and
needs better than you. So you
need to adopt a hands-on ap
proach to managing your fi
nances. After all, it’s your
money, and knowing an inside
tiphereand there can help steer
you down a path of financial
freedom for the rest of your life.
Start with the basics. If you
thing that pouring your money
intoasavings account or money
market fund is the safest way
toinvest, you'vemade your first
mistake. Certainly, a portion
of your money should be held in
safe, liquid investments such
as money market funds. And
you shouldn’t venture beyond
money markets until you have
three-to-six months’ living ex
penses in reserve. But when it
comes to your retirement nest
egg and other hefty invest
ments, keeping all your cash in
money markets, CDs and bank
savings’ accounts is just plain
risky.
So-called safe investments
Edited by
Valerie Lynn Gray
from Money Secrets the Pros
Don’t Want You to Know by
Stephanie Gallagher
The Georgia Investor » An Advertising Supplement to Augusta Focus Newspaper * FALL « 1998
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losing money — which, of
Learn from the pros
ost successful investors aren’t
necessarily any smarter or bet
ter at analyzing financial data
than the rest of us. They don’t
necessarily have degrees in business or
financial planning but they do utilize
common sense. Their guidelines are
simple, and the advice is standard for
novices and pros alike:
1. Successful investors have a plan, and
they stick to it. It’s easy to get tempted by
the latest hot stock touted by a business
magazine or Wall Street whiz. But that
isn't the way successful investors operate.
They assess their own needs first. They
look at their goals, time frame and knowl
edge of investing to come up with a plan to
suit their needs. If they are 50 years old,
for example, and have 15 years until re
tirement, they set up a 15-year plan. They
read whatever they can get their hands on
and investin what they understand. If, for
example, they hear about the terrific re
turn potential of zero coupon bonds but
don't really understand how they work,
they simply don't buy them.
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course, defeats the purpose.
The best way to build a nest
egg is by putting a healthy
portion of your assetsin growth
The prosdon’t get sidetracked by hot tips.
Instead, they buy investments they've re
searched. Thus, they can be sure of sticking
to the plan they've developed.
2. Successful investors invest smartly
and regularly. Successful investors do not
expect to hit home runs with their invest
ments every single time. They know that
one home run plus lots of strikeouts adds
up to a lot of time on the bench. To succeed
year after year, successful investors know
they must keep their money growing. They
use two methods to do this. First, they
invest in stocks and/or stock mutual funds,
recognizing that stocks are the only invest
ment with-the long-term power to grow
their money year in and year out. Second,
they invest regularly, a method guaran
teed to work for everyone. Even spend
thrifts can grow a fortune just by socking
away a little on the side every month. It's
a powerful edge that’s virtually guaran
teed. You're always adding more to your
principal; therefore, your nest egg can't
8. Successful investors are patient. Of-
investments, namely stocks and mutual
funds. Over time, stocks have outper-
formed money markets, bonds, and
other fixed-income vehicles, turn
ing in an average return of 10.3
& percent every year since 1926.
h Just watch how your money
= multiplies when youinvesta
wews. set amount each month,
g-’{ ;. earning 9 percent yearly.
£¢ 1% % Even with a low invest
ff:':_"z?'l ment of SSO per month,
your money would
to more than
g;?OOOovera%year
period.
The amount you put
into stocks clearly de
pends on your invest
ment time frame. The
longer youhavebefore
you need to use the
money, the more you
can invest. When sav
ing for retirement, a
good rule of thumb is
to take your age and
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I subtract it from 100. In
vest that amount in stocks.
Therefore, if you're 20 years
old, you can invest 80 percent of
your retirement money in
stocks. If your 50, half your
retirement money should be in
stocks or stock mutual funds.
As a plus, an automatic in
vestment plan will allow your
money to increase even if you
forget about it. A number of
fund families will waive their
minimum initial investment re
quirements if you set up an
automatic investment plan to
have a fixed amount, say SSO or
SIOO, debited from your pay
check or bank account every
month. Consider these fund
families:
Twentieth Century(Boo-345-
2021) waives its minimum ini
tial investment requirement
when you sign up for the auto
matic investment plan (equity
funds, excluding gift trust and
internationally emerging
growth funds). Minimum in
vestment: SSO per month.
T. Rowe Price (800-638-5660)
waives minimum initial invest
ment requirements for partici
pants in the Automatic Asset
Builder Plan . Minimum in
vestment: SSO per month.
Invesco (800-525-8085)
waives its minimum initial in
vestment requirement through
the EasiVest plan. Minimum
investment: SSO per month.
Many other fund companies
offer thisservix-, and somethat
don’t have established plans
will agree to waive the mini
mum if you invest automati
cally.
ten, it will take time for a good investment
to show its true value. Successful investors
understand this and, consequently, they
don't get caught up in the daily ups and
downs of the market. They know that to
succeed in the long run, they have to be
patient. Instead of jumping in and out of
investments, trying to time the market
perfectly, they buy investments that have
good value and hold on to them until the
market realizes that value. They don’t
expect to see instant growth and are not
disappointed by temporary setbacks.
4. Successful investors do not marry
investments. To be successful at investing,
you must be unemotional. No matter how
much they like a stock or mutual fund, no
matter how promising thatinvestment was
when they first bought it, successful inves
tors know that selling at the right timeisas
important as buying. It’s hard to sell some
thingthat has done nothingbutlose money,
but successful investors don't try to recoup
their losses. They know that if an invest
ment is not panning out, holding on to it will
not help. They cut their losses and move on.