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January, 2015

A MILLION DOLLARS IN A DECADE
by LARRY

To have a $1,000,000 in just ten years, so the old joke goes, start by winning $10,000,000 in the lottery ten years earlier. Though I am not about to feel sorry for them, unfortunately something like that is too often the fate of folks who inherit or win a lot of money. However, if one is willing to stick with a winning investment system, there actually are ways to have a million in a not too unreasonable period of time. Here is one method:


  1. First, save a significant proportion of one's income till having a $10,000 nest egg.

  2. Using tax-deferred accounts, invest about $1000 each in 10 stocks of major companies that have good price plus dividend growth potential over the coming 3-5 years. An investment service such as Value Line, available in most major libraries, can provide the names and ticker symbols of corporations that have projected 3-5 year average annual total returns (price performance plus dividends) of 26% or better. They do not have to all provide 26% or better results, so long as one's average picks do. In general, stick with those that are lower in risk, ones having good financial strength and excellent records of growth.

  3. After four years, review one's holdings, replacing any that do not still have similar projected returns, financial strength, and growth records with new ones that do.

  4. Repeat again after another four years.

  5. With a bit of luck, at the end of a decade one's initial $10,000 will now be worth $100,000 or more. Repeat step #3 after each new four years have elapsed. By the decade following acquiring $100,000, one can enjoy a $1,000,000 nest egg. It is simple math: $10,000 compounded at 26% for ten years = over $100,000. $100,000 compounded at 26% for ten years = $1,008,570.


Potentially Winning Stocks for Long-Term Hold
NameTicker
Symbol		Recent
Price		Annual
Dividend
BP p.l.c. (ADR)BP$37.866.7%
Cognizant Technology Solutions Corp.CTSH$55.040.0%
Google C SharesGOOG$508.080.0%
Honda Motor Co., Ltd.HMC$30.842.3%
Schlumberger, Ltd.SLB$81.332.1%
Total, SA (ADR)TOT$50.915.4%
Verizon CommunicationsVZ$47.994.7%


It is not always easy, of course, to find lots of companies whose shares will potentially compound at an average rate of 26% or better.* Yet there are almost always a few, enterprises that have exceptional potential or ones that are going through a rough patch so that their shares are depressed. When the market is a bit ahead of itself, as is the case currently, one may only find a handful such as those in the table. Once there is a new bear market, however, many more strong company bargains will inevitably appear with which to round out a portfolio of ten.

There are other ways to acquire a million in the stock market. Warren Buffett pointed out a few years ago that if one had invested just $40 ($540 in today's dollars) in Coca-Cola in 1919 and held onto the resulting shares since then, he or she could now have, after stock splits and with all dividends reinvested, from that single investment, an over $5,000,000 nest egg. Actually, following that comment, Coca-Cola has continued to increase, and one's initial $40 would now be worth nearly $11 million. This is Buffett's example of the potential of investing in wonderful businesses. Short of that kind of wisdom or good fortune, however, the above steady-as-she-goes purchase of baskets of winning companies' shares is an approach that works.

Good luck with your own investing researches, patience, and rewards.

(*Such projections are estimates only. There is no guarantee of future returns.)



DISCLAIMER

Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)



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