Invest Like a Millionaire-Part I 7/22/07

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Invest Like a Millionaire-Part I 7/22/07

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC

Invest Like a Millionaire-Part I

“Investing Like a Millionaire- Part I”



Last week I outlined the ‘Simplest Money Management System in the World’ and assuming you adopt it, you will soon have money available to invest.  So the million dollar question for you is how can you invest like all those self-made millionaires?  The answer is both simple and complex.  Once you have money to invest, at the most basic level, you only have two broad choices. 


  1. Fixed Income Investments.  You can invest in fixed income assets such as certificates of deposit, money market accounts or bonds.  With these investments, you are a ‘lender’, meaning you are lending money to an institution such as a bank, brokerage firm, corporation or government agency with the promise of interest payments and the return of your investment after a stated period of time.  Historically, these types of investments have earned between 4.5% and 5.5% annually. 
  2. Equity Investments.  Equity investments include stocks and stock mutual funds, real estate and private businesses.  With equity investments, instead of being a lender, you are an owner.  Historically, equity investments have earned 9% to 11% or more annually. 


The long-term historical return for equity investments is at least double that of fixed income investments.  That’s why the vast majority of self-made millionaires choose equities as the primary strategy for growing their wealth.  Fixed income assets are used primarily for emergency reserves.  While investing in equities can appear to be an overwhelming task for the novice investor, it doesn’t have to be.  In my book, “The Complete Idiot’s Guide to Getting Rich”, I discuss detailed strategies for investing in stocks, stock mutual funds, investment real estate and how to start your own business.  Over the next three weeks, I’ll cover the basics of each of these areas, starting this week with stock mutual funds.


Perhaps the two most important principles to understand about investing in stocks and stock mutual funds are:

  1. You need to have a well defined strategy for your investment program, preferably a written strategy in the form of an Investment Policy Statement (IPS).  Choose an investment strategy that has a long-term record of success.  For a sample IPS, go to the Resource Center at
  2. For any investment strategy you choose, you should anticipate that it will look ‘broken’ approximately one-third of the time.  In fact, over a typical market cycle (3-7 years), you can expect your portfolio to perform like Aladdin’s Lamp about one-third of the time; look completely broken about one-third of the time; and to provide expected returns about one-third of the time.  The single biggest mistake many investors make is getting out at the bottom of one strategy into the top of another strategy over and over again.


To help jump start your investment program, here are two tools you can use:

  1. I have posted an excerpt from my book on my web site at the Resource Center at (for the next 3 weeks only), which outlines exactly which mutual funds to invest in depending on how much money you have available to invest. 
  2. Receive free our weekly eMoney Report which provides you a 2-minute overview of the stock market along with a detailed review of the markets.  To receive this report, send an email to [email protected] and put ‘eMoney Report Offer’ in the subject line.