Secrets of the Great Investors

I’ve been told that there are 293 different ways to make change for a dollar. I don’t know whether that’s true or not, but I definitely do believe that there are at least that many ways to lose a dollar. Over the years, a number of my friends and associates have made disastrous financial decisions. (As a matter of fact, I’ve made a bucket-load of my own.) It usually happened when our eyes became set on quick riches, and we stopped using common sense. Could this be the proof that we humans have a lot in common with ostriches whose eyes are larger than their brains?

Following the Lead of Successful People

I was only 39 years old when the doctors at St. Thomas Hospital broke the news—my heart wasn’t doing very well. As a matter of fact, they told me, if something wasn’t done pretty quickly I was likely to assume room temperature! To make a long story short, God blessed me through five bypasses and a full recovery. It was a radically sobering time in my life.

But, believe it or not, those were good days. My faith in God grew exponentially. Trivial things, that only a few weeks earlier had seemed so important, gave way to matters of eternal significance. My prayer life improved. As my physical heart was healing, my spiritual heart became stronger, too. I became increasingly focused on knowing God and serving Him more adequately.

And, physically speaking, it was a renaissance, too. I determined to get serious about diet and exercise. But, for a guy who had always eaten about anything that didn’t crawl off his plate first—this was going to require a major lifestyle adjustment! So one of the first things I did was schedule an appointment with a nutritionist. I wanted information and motivation to help me change my lifestyle. I needed an expert to show me how to eat a healthy diet and drop a lot of extra weight. I wanted to learn from someone who led a disciplined culinary life. I longed for someone else to show me, by example, how to get trim and healthy. Boy, was I in for a shock!

The day we came in for the meeting, Bonnie and I nearly swallowed our tongues when the nutritionist came into the room. As she squeezed through the door, we realized that the poor lady was 250 pounds if she weighed an ounce! It would have been funny if it hadn’t been so pitiful. Phrases like “the pot calling the kettle black” and “physician heal thyself” whirled in our heads. Needless to say, we didn’t hear a word she said.

We all understand the concept of going to an expert for advice. None of us want spiritual advice from a backslidden Christian. We wouldn’t ask a white supremacist for pointers on developing multicultural harmony. And, in my case, I never went back to my portly nutritionist for advice on weight management. Yet, as I mentioned in Chapter 16, far too many of us go to broke people for financial advice. Instead, maybe we should be exploring the techniques that highly successful investors use. In the years that I have been a student of investing I’ve seen a pattern among many of these investment all-stars. There are some things that most of these great investors do. Most of their techniques are simple to understand. None of them are patented. They are available to anyone who wants to use them. Let’s look at some of them together.

Secret #1) Start Early
They say that today’s greatest work saving device is tomorrow. Maybe that’s true for some people. But, whether it’s a mama bird teaching her baby bird about the best time to catch worms, or a financial expert guiding a client, the advice is the same—start early.

Running with other procrastinators can be fatal. Putting off until tomorrow what should be done today is a recipe for failure. If you want to succeed, it’s best to study what successful people do. One of the greatest financial minds in the Bible was King Solomon. As one of the wealthiest people on earth, this guy knew his way around the financial block. Notice what Solomon had to say about procrastinators:

“Go to the ant, O sluggard, observe her ways and be wise…How long will you lie down, O sluggard? When will you arise from your sleep? A little sleep, a little slumber, a little folding of the hands to rest—and your poverty will come like a vagabond. And your need like an armed man.” (Proverbs 6:6,9-11, NASV)

The message is clear: The best time to begin an investing program is yesterday. But since yesterday is no longer available, today will have to do. With all the conviction I can muster, I encourage you to begin your investment program as early in life as possible. This may mean putting off some of the extras (expensive vacations, better cars, etc.) for a while longer, but believe me, the benefits of becoming a young investor can be staggering.

Nothing makes the case for this any better than hard, cold numbers. So maybe you’ll find the table below interesting. Jack and Judy Jumpstart began their investing careers at age 20 by systematically socking away $2,000 annually the first 8 years of their married lives. (Totaling: $16,000.) Assuming the money compounds at 10% annually until the couple hits retirement at age 66, their nest egg may well exceed $1,000,000.

Now, the question you might ask is: With the same assumptions in place , if three other couples wait until ages 30, 40, or 50 to start saving—how much would they have to lay aside each year until age 66 to achieve the $1,000,000+ that Jack and Judy’s original $16,000 investment may have grown to?

Well, if they begin at age 30, like Larry and Lisa Loafer, the couple would have to invest $2,800 per year for 37 years, totaling $103,600. If a couple followed in the path of Ollie and Odette Oh-No and waited until age 40 to start saving for their golden years, the burden would have grown exponentially. Starting at 40, they would have to set aside $7,600 annually for the next 27 years (a total investment of $205,200.) And, if a couple put off retirement planning until age 50, as Herb and Helen Hurry-Up did, they would have to sock away $23,000 per year for 17 years (totaling a whooping $391,000) to hopefully get their chins over the $1,000,000 bar!

Click here for table.

An Incredible Achievement (Assuming You Could Convince Your Teen To Do This)

Now, let’s put some real-life legs to this. What if you could convince your 16 year old son to trim back a little on the car he is dying to buy—in order to potentially become a millionaire? Here’s what I mean: Instead of spending the entire $7,000 he has saved for that “super-duper-hippy-dippy-daddy-bopper-car-to-die-for—suppose you could convince him to lower his sights just a little bit. Maybe by just a couple of thousand dollars. Then, suppose he invested that $2,000 in a mutual fund in an IRA that returned 12%. What would you guess that that $2,000 investment might have grown to by age 70? Would you believe $1,018,641.00 !!! Maybe that world class CD player isn’t worth the extra $2,000 after all?

The No Debt No Sweat! book discusses 5 more secrets that great investors know and understand. These simple concepts are presented in clear, simple text and easy-to-understand charts and graphs. They include:

• Secret #2) Compounding—The Great Investment Steroid. Learn how bankers get rich on you. A simple concept that Albert Einstein called the “8th Wonder of the World.”
• Secret #3) Dollar Cost Averaging (A technique used by the “greats” to reduce risk)
• Secret #4) Asset Allocation and Diversification (According to some researchers, more than 90% of long-term investment return may be determined by the way you spread, or allocate, your investments.)
• Discover Your R.T. (Risk Tolerance) By Using the Interactive Test
• Review Sample Asset Allocation Approaches
• Secret #5) The Rule of 72 (How to figure how fast your investments will double)
• Secret #6) Smart Investors Are Wary of Highly Speculative Investments and Market Frenzies
• Satan’s Investment Approach

Click here to learn more about the 19-chapter book, No Debt, No Sweat!