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April 12, 2011


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Agreed that these are the basic steps to growing wealth. Boils down to save, invest properly, and do these two things for many years.

This is what is so interesting about it, that it's straightforward yet most people don't do it. Many of us are a product of our upbringings in terms of perspectives, and get distracted from the fundamentals from an early age. Though one can't make up time, it's better to start late than not starting at all.

Pretty amazing stats showing the incredible unpredictability of retirement planning.

"Annual savings: $5,000; Chance of hitting $1 million in 20 years: 31%"
"Annual savings: $30,000; Chance of hitting $1 million in 20 years: 91%"

$5k/year might get you there a fair amount of the time. But $30K/year, 6 times as much!, might not, even invested exactly the same.

Sure beats the "chances" of making a million by playing the lottery! Yet lots of people play the lottery but don't bother to save. Go figure.

I think articles/experts underestimate the importance of return. You can invest steadily for every year and at the end of say ten years have less than the principal you put in. Return has a big impact on your savings. Of course the more you save and the longer you save the better. But even if you're putting in tens of thousands of dollars a year, if you are losing money on your investments, that's going to significantly impact how you end up when it comes time to retire.

Three simple steps, not three easy steps.

while time is important, timing is more critical.

The only reason time matters is because of the compounding at the END of the timeframe. When you have $1M invested after however many years, any additional years yeild coumpounded returns.

In other's not the beginning years that matter, it's the end years that do.

And a poorly timed down market at the end of that timeframe can spell doom for the account value.

Remember, the more you invest for the longer amount of time, the more you have at risk. The more you can lose.

Like many realized durind the last 5-10 years. They saved for decades. Lost much of it in months.

TIMING. #4 on the list. Most important.

I have been told that you can not time the market and I find it to be true. Even though I was caught in the free fall of the last drop. I did not panic. I stayed the course and it came roaring back. Now that I had that scare I am now more prudent in my diversification. I was using a service to give me advise and they did show me some good options but they are the ones that went south the most.

Sorry I did not finish the post so see above, but the important point you are trying to make is not timing but how your portfolio is structured when that portfolio is getting REALLY BIG. As you get closer to that really big do you be come more conservative or do you keep aggressive. Each will have its benifits and draw backs. I found that the people hurt the most were way to aggressive for thier age and were severly hurt when they were not at retirement age but needed to start drawing on that depressed portfolio.

Only you should decide your risk tolerance becasue you are the one who will have to live with that decision.


Yes...I am not talking about market timing. That is for fools. I am talking about the "luck" part of timing.

Are you lucky enough to have the best returns at the end, when they matter the most.

Most investors, even professionals, and especially novices, can't time or predict the market with any sort of regularity. Few managers beat the market on an annual basis and virtually none beat their benchmark on a continual basis

Studies have shown it is a crapshoot. That the market generally wins.

For those who were fortunate enough to have most of their investment timetable occuring during the great bull run of the past 30 years or so they came out ahead. Many thought they were skilled. They were lucky.

Those returns are unlikely to be repeated.

Save all you want. For a long time. That is good. But you better get the returns right, and in the right order.

Or you will end up with less than you invested.

My favorite qoute that sums up my thought on market investing are: "If you need the returns of the market, you can't afford to be in it in the first place"

I think all the other commenters make good points about returns. In the end I believe that it is all about lifestyle. Can you forego lots of materialistic items? If so you don't need that million dollars. I think it also depends on how much work you're willing to put into it. If you grow your own food your volatility for the year is out the window seeing as how you are influenced by food prices and to a lesser extent oil.

-Ravi Gupta

I agree the amount you save is more important than the rate of return specially during the first years. If you can only achieve 4.58% a year which is the current rate of a 30-year Treasury (this rate is historically low but let's assume that's the most you can get) you could only get to $1 million in 30 years by investing $17K per year.

During the first 15 years your $17K contribution would be higher than the return on your investment. After year 16 your returns are higher than your contributions.

In summary my point is that we should save as much as we can, invest that money safely and worry more about the return "of" the money than the return "on" it.

I disagree to timing becoming rule #4. Timing should not play as large a part if you reallocate your assets over time to become more conservative. Too many fail to follow the old rule of adjusting your portfolio over time to protect yourself and your investment. I agree that if you are still in an aggressive posture by year 20, timing is huge and you could lose big if the economy tanks as you begin to withdraw principle to replace your income lost due to retirement. But timing is much less important if by year 20 you have been properly minimizing your portfolios risks and become more and more conservative as you approach retirement age. If you have consistently rebalanced your portfolio over time who cares if the market tanks, your risk is minimized.

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