The Secret to Becoming a Millionaire.

It is a three step process. First, invest $50,000 in the stock market. Second, wait 30 years. Third, sell your stocks and retire a millionaire. My son sent me an article describing this get rich "quick" scheme and I concur. The scheme works. If I only knew then what I should have known then.

Oh yeah, you skeptics challenge. This scheme assumes the stock market goes up. Of course it does and the stock market will always go up over time. Sure it goes up and down in the short term, but it goes up in the long term. It has too. The capitalist system creates this upward thrust. It is inevitable. Money flows into the market every day pushing the DJIA upward and onward. 100 million people work and pour money into IRAs, retirement funds, social security, HSAs and union dues. It is billions of bucks. Not to mention that the $billions we pay the middle east oil emirates are invested right here in the USA.   And of course Chinese companies, like Alibaba,  are now going public on the American stock market exchanges.

The money from all these various sources is deposited into banks and managed by investment managers. What do they do with it? They buy stocks. What else are they going to do with it? Leave it in the bank and earn 0.25%. Are they going to buy real estate? No way. One way or another the money flows into stocks, driving the price of stocks up and thus the DJIA. It is no secret. It is just math. Where do you think your social security money goes? Into a bank? Into investments and so on.

There is one problem. If your money increases in value at the same rate of inflation, (typically 1-3% per year) then you will be a millionaire when you retire in 30 years, but your total investment will still be worth, in terms of purchasing power, the same $50,000 you originally invested. However, the stock market traditionally increases at a rate higher than inflation, and thus you wind up with more real purchasing power than the original investment. 

What about the crash of '29? It can not be repeated because pre '29 there was no gigantic flow of money into equities from the numerous sources, I already mentioned, forcing the DJIA upward. What is the concern then? Over the long term inflation. e.g. I remember when gas was $.10 per gallon. 

Thirty years from now only the millionaires will be able to afford to buy gas. If it increases at the rate it has for the last 30 years, gas will be $40 per gallon and it will cost you $800 to fill up. Inflation is the real culprit. A car will cost $600,000. And we will all be millionaires. But so what? Still the three step process is the best advice that I know to follow.

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