Categories

Investing

Tools

  • Economy & Politics
  • Investing
  • Personal Finance
  • Related Posts


    Cops Exit Ebola Victim Apartment, Dump Gloves, Masks In Sidewalk Trash Can
    25 Banks Said To Fail European Stress Test, 10 In Talks On Capital Shortfall
    Overnight Futures Fail To Ramp As Algos Focus On New York’s First Ever Ebola Case
    Why Gold Is Undervalued
    Everything You Need To Know About Blue Chip Earnings In One (Ugly) Table
    Google Vs The Entire Newspaper Industry: And The Winner Is…
    It’s A Green Back For A Reason!!
    UPS CEO: Firm Is Ready For Peak Season Challenges
    Futures Decline On Weak Amazon Results, Ebola Concern
    P&G To Exit Duracell Battery Business
    Ford’s Lower Profit Beats Estimates; Sales Down On F-150 Launch
    Swiss Officials Search Sarasin Bank In German Tax Probe
    Stress Tests, Ebola Cool Global Stocks After Best Week Of Year
    Pfizer’s $11 Billion Buyback Plan Deflates AstraZeneca Bid Hopes
    73 Swiss Banks Ask U.S. To Revise Proposed Tax Amnesty Deals


    My ‘10 Percent Solution’ For Increasing Your Chances Of Becoming A Millionaire

    Do you want to become a millionaire?

    That’s obviously a rhetorical question; the majority of us would love it. But what’s your plan for achieving that goal?

    If your plan is to make that sort of wealth in the stock market, then what’s your strategy? Blue-chip stocks? Index funds? Or do you want to watch your dividend “paychecks” roll in by the truckload?

    All of these strategies are great. There’s nothing wrong with them, and they’ll probably make you money in the long run.

    But I doubt they’ll make you a millionaire — at least not in time for you to enjoy it.

    They’re not going to give you those knocked-out-of-the-park returns that you’ve heard about since you first learned about the stock market.

    No, I’m convinced that if your goal is to reach a seven-figure bank account, you need to follow something I like to call the “10 percent solution.”

    The idea behind it is simple. If your goal is to become a millionaire in the market, then you need to dedicate a portion of your portfolio to swing for the fences.

    Let me explain.

    My daughter is in private school. She will eventually go to college and will need cars, trips and — someday — perhaps a wedding.

    For her and for the rest of my family, I’ve allocated 90 percent of my portfolio to safe and reliable assets — the kind of assets I know will allow me to meet my comfort level and feel confident knowing I can adequately provide for my family.

    But the other 10 percent? That’s different.

    This portion is dedicated to the “game changers.” These are the types of stocks that have the potential to move the needle not only on the balance of my account, but on the life I live.

    You see, most investors are stuck in the slow lane, passively accepting the market’s returns and failing to use equities as the supercharging force they can be.

    While it’s important to have the bulk (90 percent) of your portfolio tied to dependable assets, I think a portion (the other 10 percent) needs to go toward investments with the potential to knock the cover off the ball.

    Here’s How The 10 Percent Solution Works

    I’ll start this example with a modest amount to show you how it works. Assume you start with a $25,000 portfolio that tracks the broader market. The average annual return from 2002 through 2012 for Standard & Poor’s 500 index was a measly 3.5 percent (with dividends). That means $25,000 turns into $36,499.24 in 11 years.

    But things can change dramatically when you add in the potential for just a few big winners.

    Let’s say you invest 90 percent of your $25,000 portfolio, or $22,500, in the broader market to achieve that 3 percent return. Then you allocate the remaining 10 percent, or $2,500, to a collection of game-changing picks — stocks with the potential to snag major gains.

    If that part of the portfolio averages 30 percent a year, then the initial $2,500 grows into $44,804.01 after 11 years.

    Add in the $22,500 and its market return, which has grown to $32,849.32, and you’ve got a pretty nice nest egg of $97,552.06 — nearly double the other portfolio, all thanks to where you put just 10 percent of your money.

    (Note: You’ll notice that this return isn’t $1 million, but the results are fully scalable. You can simply start with more capital to reach your goal.)

    I’ve made the comparison in the chart to the right. Would you rather have Column A, or would you rather end up with Column B, which uses the 10 percent solution?

    I think the answer is obvious.

    Now you may be asking, if the 10 percent solution seems to work so well, why not dedicate 50 percent or 100 percent of your portfolio to it?

    Simple answer: It’s always important to be diversified, so putting all of one’s eggs into a single basket is never a good idea, no matter how spectacular the potential for returns.

    I can sleep at night knowing that most of my money (the majority of my equity portfolio) is invested so as to expose it only to general broad-market risk. Only a small percentage is allocated to game-changing plays with return potential that could move the needle on the overall portfolio.

    The fact is, if you pick a few winners over time with a small subset of your portfolio, then it can make an enormous difference. And 10 percent can do the trick nicely. It’s enough to make a difference, but not enough to keep you up at night.

    Don’t get me wrong, though. I’m not guaranteeing my system will make you a millionaire. There are no guarantees when it comes to investing.

    Action to Take: But what I’m saying is this: The results of a portfolio with room for big winners can be dramatically different from those that stick to cash, fixed-income or even the returns available in the broad market.

    And if your goal is to eventually become a millionaire from the market, then I can’t think of any better route.

    StreetAuthority.com[Note: Are you interested in finding the next game-changing stock? My research team and I have spent the past several months looking for the "next big thing." What we've found will surprise you. This investing opportunity is so powerful that we think it could actually solve high unemployment problems, put an end to the U.S. trade and budget deficits, and bring on the third industrial revolution. Click here to learn more.]

    Andy Obermueller is the Chief Investment Strategist for Game-Changing Stocks. He spent ten years as a financial journalist, working for some of the nation's largest newspapers. At the business desk of The Star-Ledger, his market acumen helped guide the financial news read by more than a million people each day. After watching business from the outside for ten years, Obermueller got an inside look as a commercial lender with Wells Fargo's Business Banking Group, where he worked prior to joining StreetAuthority.

    | All posts from Andy Obermueller

    Discuss this Story:

    Comment Policy: We encourage open discussion. Comments including racist statements, profanity, name calling or spam will be removed at our discretion. We use filters for spam protection. If your comment does not appear it is likely because it violates the policy.

    Microsoft Sales Beat Street Hopes, Cloud Profits Up
    Amazon’s Holiday-quarter Forecast Disappoints, Shares Dive
    UPS, FedEx Seek Ways To Manage Massive Peak Season Package Bulge
    Sears To Close Stores, Lay Off About 5,500
    Must-knows About The Takata Air Bag Recalls
    Promising Hepatitis C Drug = 100% Gain
    GM Q3 Earnings Strong On North America, China
    Is The Tupperware Party Over?
    7 Brain Biases That Could Affect Your Investing Strategy — And How To Outsmart Them
    This Is How Caterpillar Just Blew Away Q3 Earnings
    Futures Bounce On Stronger Europe Headline PMIs Despite Markit’s Warning Of “Darker Picture” In “Anaemic” Internals
    Russia Is De-dollarizing
    How The NSA Has Turned Into A Giant Profit Center For Corrupt Insiders
    Caterpillar Profit Beats View, Raises Outlook; Shares Gain
    Comcast Reports Higher Quarterly Revenue, Profit
    GM Posts Higher-than-expected Profit On Strong North American Demand
    Stock Futures Inch Up, Indicating Rebound; Earnings Awaited
    Business Activity Improves In China, Euro Zone But Little Sign Of Turnaround
    Honda Executives To Take Pay Cut After Fifth Fit Hybrid Recall
    U.S. Prosecutors Probe Takata Corp Over Statements
    Euro Zone Business Growth Unexpectedly Gains Pace, Prices Still Falling: PMI
    Tesco Scraps Profit Outlook As Accounting Black Hole Deepens
    Chinese Trainmakers Set To Go Head To Head For California Deal
    U.S. Stock Options Markets Agree To Need For Trading Halts On Big Moves
    Buffett Copycats Risk A Pounding As Berkshire Portfolio Suffers
    Bond Funds Stock Up On Treasuries In Prep For Market Shock
    Stocks Fall As S&P 500 Breaks 4-day Winning Streak
    Apple Appears Upstoppable: Stock Hits High
    Yelp Shares Dive On Sales Forecast
    AT&T Shares Drop As Earnings Miss Estimates
    Read more from Investing...

    Liberty Investor Digest

    Get today's most important
    financial headlines all in
    one place by email!



    Sources


    close[X]

    Sign Up For Liberty Investor Digest™!

    Get Liberty Investor Digest FREE By Email!

    Input your name and email address in the fields below and get today's most important financial headlines sent straight to you inbox!

    Privacy PolicyYou can opt-out at any time. We protect your information like a mother hen. We will not sell or rent your email address to anyone for any reason.