One Simple Step to Retire Rich

By John Del Vecchio  |  October 31, 2019

There’s one simple step you can take to retire rich.

It only takes about two seconds. After that, your mind will be clear. Your goals easier to reach.

Ready for that step? Here it is…

Ignore the S&P 500.

The S&P 500 is considered the main stock benchmark. Thousands of investment funds that don’t invest in S&P 500 stocks are benchmarked against it.

But focusing on the S&P 500 is bad for your retirement account.

Here’s what I mean…

Meeting Your Goals Is the Important Thing

The benchmark you need to follow is simply what it will take for you to reach your investment goals. If you need $1 million to retire and you have $2 million in liquid assets, then why are you risking anything at all?

If you own the S&P 500, you may get the highest return versus other options. You may also suffer several 30-50% losses on your road to sitting on the beach in your golden years. Like most people, you’ll end up selling out after those big losses and delay retirement or undermine it all together.

It happens every market cycle to millions of people.

It shouldn’t matter what the market is doing. What should matter is reaching your goals. You do that by saving and then building a portfolio of assets that you can stick with through thick and thin.

The Market Doesn’t Always Matter

My cousin recently asked me whether she should buy an investment product that pays 3.75% a year and is locked up for five years. It’s $25,000. She’s worried she could make more in the market.

It’s possible she will make more in the market. She could also lose 50%. So, really it depends what she plans to do with the money and whether she needs it within five years.

I don’t give investment advice. Especially to family… But I helped her think about the situation.

Her husband is a retired teacher with a defined benefit plan. Most people wish they had one of those. She’s a successful real estate agent. That business could easily go into the dumps for a period of time though.

In the end, they don’t need the money in anytime soon, but don’t need to risk it in the market since they have other equity investments. So, the 3.75% looks great since you can’t get that in cash. As a result, it doesn’t matter what the market does. If they reach their goals, who cares?

I answered a similar question recently at the Irrational Economics Summit.

The Plan to Become a One-Percenter

The guy wanted to know what asset classes to buy. Since I don’t give investment advice, I answered indirectly. I stated that his true benchmark are his needs. He needs to figure out how to get there by sticking with the plan. Ignore the S&P 500 and ignore what your friends and neighbors are doing. Doing what they’re doing is a good way to stay poor.

In my upcoming book Unbounded Wealth, I lay out a plan that invests in just three main asset classes.

It’s just a suggestion. But since 1970 you get the same return as the market with one fourth of the risk. There’s nothing goofy in the portfolio. No leverage. No IPOs. No options. No hot fads. Your money isn’t locked up.

The S&P isn’t the benchmark either. It’s a simple illustration to show if you sock away just a few dollars a day, act consistently, and stick with the plan, without taking huge risks, you’re guaranteed to be a one-percenter.

Nothing wrong with that.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR