How Anyone Can Make A Million

How Anyone Can Make A Million

Is it really true, asks Aaron, my personal assistant, that I could become rich?

Yes, I say, if you do one simple thing. Come off it, Richard, that can t be true. Enter Alison, Aaron s younger friend. Alison is a hairdresser with pink, punkish hair. If it was easy, we d all be millionaires. You know as well as me that there are a few people with all this, she waves at the swimming pool, lush gardens, and tennis court, and then there are all the rest of us, struggling with money.

Aaron, Alison, and I are basking in November sunshine, sip- ping ice-cold drinks at my house in Spain. I make the most of my captive audience.

You re right, I tell Alison, most people ” even with big jobs and incomes to match ” don t have much spare cash. I don t say it s easy to accumulate money. I just say it s possible for everyone.

So what s the secret? Aaron is 23, right? Assume he saves $200 a month Pigs will fly, said Alison. Maybe, I say, but imagine he saves and invests $200 a month, and it grows at 10 percent a year for 42 years, until he s65. How much would Aaron have then? $200 a month is $2,400 a year ” times 42 is $100,000 and change. But you have to add the growth on top.

So, I face Aaron, what s your guess? Maybe double that. $200,000? Alison? I m no good at sums, she says, but it couldn t be that much. Maybe $150,000?

The right answer, I reveal, is over $1.4 million. They re stunned.

But that assumes Aaron could save 10 percent ” I don t believe that

Fine, I ll come to that later, I interrupt, but Alison, what about you?

Harrumph, she says. Nobody earns less than me. You know how little hairdressers get? Worst-paid profession. Wouldn t be worth saving.

How old are you? How much do you earn? Eighteen. $16,000 a year. A tenth is $1,600. If I saved that, which I don t think I could, what would my nest egg become?

I produce calculator and paper. The computer is faster, but I want to demonstrate the sums. Aaron fetches more drinks. When he s back, I m ready.

Whaddyathink? If Alison saved $1,600 a year till 65, what would she have?

Aaron grabs the calculator. $1,600 times 47 years equals around $75,000. He multiplies that by five, his estimate for compound interest. $400,000, he guesses.

No way, Alison shrieks. Can t be more than $250,000. Have I got news for you, I tell her. Clich s seem to be expected. The right answer is $1.5 million.

Impossible, she snorts. I earn much less than Aaron, there s not much difference in our age, you say I d get more than him. Calculator must be glitched.

No, I say. It makes sense. The compounding is so powerful, just a few extra years make all the difference. It s more important to start saving early than to earn a lot.

It s all just numbers until you say how we save 10 percent of our pay, said Alison. Don t see how we can, we always spendmore than we earn.

I ll come to that later, I said. And I will. But first, should we care about money?

http://flylib.com/books/en/1.522.1.36/1/

Why do 20 percent own 84 percent?

Why do 20 percent own 84 percent?

Money is a force, like the wind, the waves, and the weather. Money dislikes being equally distributed. Money clonesmoney.

Why? How can we attract money?

Money obeys the 80/20 principle because of compound interest ” Einstein s most powerful force in the universe.

Start with a small dollop of money, save and invest it, then compound interest will do the rest.

In 1946 Anne Scheiber, who knew little about money, put $5,000 into the stock market. She locked away the share certificates and stopped worrying. By 1995 her modest nest egg had transmogrified into $22,000,000 ” up 440,000 percent! All courtesy of compound interest.

If we never save money, we will always be poor, no matter how much money we earn.

Most people have very little money because they don t save. The typical 50-year-old American has earned a great deal but has savings of just $2,300.

People with the most money have typically saved and invested it for many years. Compound interest multiplies savings in a breathtaking way.

http://flylib.com/books/en/1.522.1.36/1/

Have you wondered how people became wealthy?

Author: Almost Anyone Can Be A Millionaire

New Britain Native Writes Formula Book

February 28, 2000|By BILL LEUKHARDT; Courant Staff Writer

NEW BRITAIN — Growing up here in a middle-class family, Ed Dzwonkowski sometimes wondered how people became wealthy.

He had a paper route after school, but that wasn't a road to riches.

It has been decades since those news carrier days, and Dzwonkowski, 42, and a certified financial planner living in California, now thinks he has figured out how almost anyone can become a millionaire.

The key is working hard and consistently investing the weekly paycheck in assets that will appreciate in value.

``It does not happen overnight. You have to be consistent. In the old days, pensions and Social Security might have provided enough. Now, people usually don't stay in one company for life, and they may want to retire early or be forced to retire early because of illness or other reasons,'' Dzwonkowski said. ``So it's prudent to plan for yourself.''

He has put it all into a book titled ``How You Can Become a Millionaire,'' which he had printed himself and is selling through distributors across the nation. It costs $19.95 and is published by Great Spirit Publishing Co. in Huntington Beach, Calif. Dzwonkowski is Great Spirit Publishing.

According to Dzwonkowski, if a person puts $264 a month, every month for 35 years, into investments that yield 10 percent interest, that person will have $1 million at the end of 35 years.

``And if you fall short of your goal, you'll still have some sizable amount that you wouldn't have had if you hadn't begun investing,'' Dzwonkowski said.

Asked if he is a millionaire yet, Dzwonkowski gave what he called his standard answer: ``Not yet, but I'm closer today than I was yesterday. I do follow my own advice.''

The book is in its second printing. The first 1,000 copies were sold to people as far away as New Zealand. Those requests came via the Internet, he said.

Dzwonkowski's father, Edward ``Butch'' Dzwonkowski, is New Britain's registrar of voters. He says he's proud of his son.

``He gets on my case about investing. But I tell him I'm too old,'' the elder Dzwonkowski said.

His son has two words: Anne Scheiber.

Scheiber, who died in 1995 at the age of 101, was a low-paid clerk with the Internal Revenue Service who decided at age 50 to start investing, using $5,000 she had squirreled away.

She invested every month, and by the time she died, her investments had grown to $20 million, generating income of $62,000 a month. She left her money to Yeshiva University in New York.

``Anne Scheiber did what I advocate. Consistent savings and investment over time. Look what it did for her,'' the author said.

http://articles.courant.com/2000-02-28/news/0002280183_1_investing-anne-scheiber-millionaire

THE ESSAYS OF WARREN BUFFETT - Buffett Powerful Philosophy for Investing

Published:    March 28, 2001

THE ESSAYS OF WARREN BUFFETT by, Joseph Dancy - LSGI Technology Venture Fund
		Living quiet, unpretentious lives Mr. and Mrs. Othmer - a professor of chemical engineering and a former teacher - died a few years ago in their nineties. When the Othmer's died, friends were shocked to learn that their estate was worth $800 million. The Othmer story is not unique. Anne Scheiber never married and worked for the government, never making more than $4,000 a year. She lived a quiet, simple life. When she died in 1995, her estate was worth $22 million. Likewise, Jacob Leeder lived in a modest home and drove a 1984 Oldsmobile station wagon. Occasionally he would go out to eat - usually at a cheap, cafeteria- style restaurant. It wasn't until Leeder died last year that friends discovered that he was worth $36 million. How did these people get so rich? Like many long term investors, they put their money into well managed undervalued companies and left it there. The Othmers had an additional benefit: in the early 1960s they each invested $25,000 with Warren Buffett. Today Mrs. Othmer's shares are worth $578 million; her husband's, sold on his death when the price was lower, were worth $210 million. Even without Mr. Buffett, if they had put their funds into the broader market they still would have done well - having an estate with a current value of between $50 million and $100 million. The Essays of Warren Buffett The investment strategies utilized by Warren Buffett to attain the Othmer's gains were recently published by a law professor at Cardozo University. Entitled "The Essays of Warren Buffett: Lessons for Corporate America" it is a compilation of Buffett's annual reports and other communications, and is a good overview for those not familiar with his investment philosophy (available by sending $17.45 to Prof. Lawrence Cunningham, Cardozo University, 55 Fifth Ave., New York, NY 10003). Some of Buffett's more interesting investment philosophies are as follows: 1. Buy a Good "Business Boat" Buffett points out the importance of choosing a company situated in a growing and profitable industry. He identifies his largest investment mistake - buying the company his firm was named after (Berkshire Hathaway) - not because the company was flawed, but because the industry it was in (textiles) was so unattractive. Buffett recalls how the textile industry provided very meager returns for Berkshire. No matter how well managed the company was it would always have subnormal returns. The textile industry was a commodity business, competitors had facilities located overseas that were low cost producers, and substantial excess capacity existed worldwide. Buffett claims he would not close down a business that is important to a community just to improve the corporate rate of return, but if it appeared that losses would be unending no other course of action makes rational economic sense. Buffett notes "a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row . . . Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks." 2. Compound Returns by Deferring Taxes One reason that the Othmer's were able to accumulate $800 million in assets was because their investment in Berkshire stock compounded and their capital gains taxes were never realized. "Tax-paying investors will realize a far, far greater sum from a single investment that compounds internally at a given rate than from a succession of investments compounding at the same rate. But I suspect many Berkshire shareholders figured that out long ago" according to Buffett. Illustrating the point he notes "imagine that Berkshire had only $1, which we put in a security that doubled by year end and was then sold. Imagine further that we used the after-tax proceeds to repeat this process in each of the next 19 years, scoring a double each time. At the end of the 20 years . . . we would be left with $25,250. Not bad. If, however, we made a single fantastic investment that itself doubled 20 times in 20 years . . . we would be left with about $692,000." Buffett's calculations use a capital gains tax rate of 34% - much higher than today's, but the point is well taken. Deferred taxes allow an investment to compound, increasing the return on investment. 3. Concentration of Investments Professor Cunningham notes that "contrary to modern finance theory, Buffett's investment knitting does not prescribe diversification. It may even call for concentration . . . a strategy of financial and mental concentration may reduce risk by raising both the intensity of an investor's thinking about a business and the comfort level he must have with its fundamental characteristics before buying it." Other articles have noted the tendency of Buffett to concentrate his investments, and claim that this is part of his success. If nothing else, concentration allows an investor to follow a company much more closely - which allows them to better judge when a stock is undervalued. 4. Good Business Judgment & Mr. Market Buffett subscribes to the theory that the market is not always efficient, and that at certain times companies will be grossly undervalued or overvalued. The market allows an astute investor to buy positions in companies well below intrinsic values. In the long term, such value will be recognized. "An investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace . . . The speed at which a business's success is recognized is not that important as long as the company's intrinsic value is increasing at a satisfactory rate - in fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price." 5. Small Base From Which to Grow Due to the size of the funds Berkshire now manages, Buffett recognizes that the return he will obtain from his investments will be lower than when he was managing much smaller sums. Using analogies to the growth of bacteria, he notes that growth from a small base can continue at a much faster pace for much longer than from a large base. The larger sums now being managed limit the size of companies Berkshire can invest in - using a concentrated investment approach meaningful investments in small and micro-cap companies cannot be made from a practical standpoint. Summary Those who are familiar with Buffett's investing style, or who have read some of the books on him published recently or the Berkshire annual reports, will find little new here. Even so, it is always interesting to read the thoughts and investment strategies of one of the world's most successful investors. http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/wa/ArticleViewPage?source=IdKnEfOoDlLlKcDcMaKiAbLb

Sharemarket crash survival guide

By Bruce Jackson - Tuesday, November 22nd, 2011

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Shares are being trashed, again. The temptation is to sell everything and run for the hills. Instead, take a chill pill and consider The Motley Fool’s patented sharemarket survival guide.

Down down, shares are going down.

After weeks of worrying about European sovereign debt woes, focus has again turned back to the U.S. and its own debt crisis.

In the U.S, the S&P 500 has posted its worst losing streak in 2 months.

Over the last 3 weeks, our own S&P/ASX 200 index has fallen almost 7 per cent in the last 3 weeks. Some shares have fared even worse…

Company	% Share Price Fall Oct 28 2011 to Nov 21 2011
Australia & New Zealand Banking Group(ASX:ANZ)	(10.6)
National Australia Bank (ASX:NAB)	(10.7)
Iluka Resources Ltd. (ASX:ILU)	(11.3)
Incitec Pivot Limited (ASX:IPL)	(12.5)
Lend Lease Group (ASX:LLC)	(11.2)
Mesoblast Limited (ASX:MSB)	(14.1)
David Jones Ltd. (ASX:DJS)	(13.1)
BlueScope Steel (ASX:BSL)	(29.5)
White Energy (ASX:WEC)	(72.4)

With the exception of White Energy, these are all big companies. It has been a tough time for investors.

So what are the keys to surviving market downturns? Here are some suggestions:

1. Don’t get absorbed in despair and panic. Ignore the violent emotional swings, and instead simply maintain a degree of detachment with regard to the whole business.

2. Be a regular saver and investor. That way, a market downturn becomes nothing more than a buying opportunity.

3. Reflect that Anne Scheiber, the U.S. lawyer who invested $5,000 in 1944 and died in the mid-1990s worth over $20 million, never sold a share and invested only in common, easily understandable companies. To her, we must presume, market fluctuations were an irrelevancy.

4. Finally, stop buying the newspapers, don’t watch the TV and go away on holiday. In short, switch off the market. Life’s too short for all that hullabaloo.

(As an aside, if you are worried about the market crash, you might want to first check out our new free report, Read This Before The Market Crashes. It could save you hours of heartache, and thousands of dollars. Click here to request your report now, whilst it’s still free and available.)

As our Investment Analyst Dean Morel said just a couple of weeks ago…

“When bearish volatility, caused by emotions and a lack of reason, leads humans to herd, sharemarkets become irrational and oversold. That irrationality allows investors who are able to control their emotions and act in a calm, balanced manner, to take advantage of the many opportunities the market throws up.

There is no need to make big decisions. You don’t  need to be fully invested in, or totally out of the market. Gradually building positions in the best companies while maintaining a cash cushion will make investing easier and less stressful.”

Stock market falls are like the seasons of the year. They are a natural part of the investment landscape, they are normal and can even be very healthy.

This latest crisis, like all crises before, will pass. And those that survive will prosper.

http://www.fool.com.au/2011/11/investing/sharemarket-crash-survival-guide/