Draft Copy, January 5, 2008

What Kinds of Stock Market Returns Are Billionaires Getting?
    In 2005 and again in 2007, I set about to try to learn how much the richest and savviest investors can earn on their portfolios...multi-billionaires like Bill Gates, Larry Page, and Larry Ellison, who can afford to establish their own investment advisory companies. I'm sure I don't begin to have the full story, but one high-water mark I found is a highly successful hedge fund, Renaissance Technologies, founded in 1982 by Dr. James Simons (mathematician).  Its $5 billion Medallion Fund has averaged a 38.5% per year return since 1989. (This fund had problems during the August market correction, and showed a small loss at that time, but ended November up more than 50% for the year-to-date.) As of November 27, 2007, the fund had $34.5 billion under management. Renaissance Technologies is staffed by about 300 scientists and mathematicians, roughly a third of whom have Ph. D.'s.  The success of his Renaissance Fund has made Dr. Simons a multibillionaire. What's particularly significant about the Medallion Fund is that it's a multibillion dollar fund. It would seem to me to be a lot easier to generate 38.5% annual returns if you're investing a million dollars than it would be if you were trying to place $5 billion. At the same time, the Medallion Fund isn't big enough to accommodate the fortunes of titans like Bill Gates, Larry Page, Sergei Brin, and many others. (Larry Page and Sergei Brin have some private venture capital invested in two of the most promising solar energy companies: Nanosolar and eSolar. Bill Gates and Saudi prince Alwaleed bin Tala have bought the 74-hotel Four Seasons hotel chain. Mr. Gates, along with Warren Buffett, also owns a stake in Netjets, a private-jet time-share company.)

Can You Get Rich Investing in the Stock Market?
Yes. 
    It should be noted that the stock market is a wealth multiplier rather than a wealth creator. If you have $0 to invest, you you'll get $0 back. This is different from a job, where you can sell your time in return for money.
    Also, it's about as quick and easy to turn $1,000,000 into $2,000,000 as it is to turn $1,000 into $2,000, or $1 into $2.
    It would be more correct to say that the stock market can make you richer rather than to say that it can make you rich. But it can make you very much richer, 1,000-folding your money over time. How much time? That's the subject of the discussion below, but the best (obscure) "cookbook" investment portfolio that I've located so far has rewarded its investors with a 30-fold total return over the 9 years from December 31, 1997, through December 31, 2006  (spanning both bull markets and a major bear market)[1]. This corresponds to an average rate of return of about 46% a year.  At this rate, your money would double in slightly less than 2 years, would 10-fold every ~6 years, and would 1,000-fold every ~18 years. $4,000 invested in a Roth IRA in 2007 would become $4,000,000 by 2025. It's important to note that what works for $4,000 won't necessarily work for $4,000,000, and certainly won't work for billions of dollars. The "nanocap" companies on which this portfolio is based are so small that investing more than a few thousand dollars at a time will raise or lower the prices of their stocks. (And off course, past results are no guarantee of future performance.) 
    There are other strategies that claim comparable performances, as discussed below. But note that the strategies that claim comparable performances are based upon limited-term opportunities such as the rise of emerging nations, and an investment boom in alternate energy and green technology industries. 
    The second-best portfolio would have 20-folded your money over the nine-year period.

The Middle Class Versus the Upper Class
    We in the middle class are programmed to seek fulfillment through our jobs and our careers, supporting ourselves through the fruits of our labors. If we want to buy something, we think in terms of earning the money for it and then spending what we've earned on whatever it is that we want to buy.
    Members of the upper class are programmed to contribute through furnishing leadership, public service, and philanthropy, supporting themselves through the fruits of their investments.

Building a Family Fortune
    We in the middle class would like to have enough money that we could live like the upper class, but it seems all but impossible to accumulate enough capital to live off our investments. If we were multimillionaires, we could probably hire professional financial consultants, but that's a chicken-and-egg situation. ("Them what has, gets; them what hasn't, don't") But I'm going to suggest how we might do it (or at least, how I think we can do it), and hopefully, help to make it a reality. I think we can set up a family fortune that can propagate down generations to come.
    Could I be wrong? Certainly. I haven't done it yet. Still, I'm hopeful that it may be feasible.

   What follows is a listing of different techniques for building a nest egg over time, together with a discussion of how I think  the stock market works.

Set It and Forget It: A Sure, No-Brainer Way to Double Your Inflation-Corrected Money Every 10½Years
200-Year History of the U. S. Stock Market
    Investing blindly in the entire U. S. stock market will, after correcting for inflation, double your money every 10.5 years. The chart below, created by Jeremy Siegel and taken from his book, "Stocks for the Long Run",shows the return on different types of financial assets over the 203-year period from 1/1802 to 1/2007. What’s so startling about the total return on stocks is the fact that it’s cleaved to a 6.8% per year average annual total return throughout our nation’s history, through wars, depressions, and the transitions from an agricultural, pioneering economy through the industrial revolution to the modern information and services economy.
        Closer examination of the “Stocks” curve shows that from about 1875 to about 1918, stocks tended to return a little more than 6.8% per year. Then from, perhaps, 1908 through 1921, someone who bought a basket of stocks and held them would have lost money (but would have made it all back and more besides between 1921 and 1929).
    The market bottomed in 1921, soared to a peak of 381 on the Dow in 1929, and then fell with the Crash of ’29 to a low of 41 on the Dow in the depths of the Depression in 1932. (Although the Dow Jones Industrial Average in 1932 was only about 1/9^th what it was at its peak in 1929, dividend yields should have kept the total return from sinking the way the Dow did.)
    Stock market returns remained a little below average during World War II. The stock market made a super-bear market bottom in 1947 from which it entered a long super-bull market through 1966. From 1966 to 1982, the market was again in a super-bear market, losing money for investors who bought and held. (This does not mean that you have to lose money during a super-bear market. I made a great deal of money during the 1966-1982 super-bear market. However, it required selling my holdings during presidential election years when the stock market was at a peak, and buying back new holdings during the midterm year when the stock market was in a valley.)
    To sum it up, the U. S. stock market has delivered a 6.8% total return to patient investors over its lifetime, although there have been extended periods of the order of 15 years when it yielded considerably more than 6.8% a year, and extended periods of the order of 15 years when it generated considerably less than 6.8% a year (more about this later).
    Since 1956, the U. S. stock market has, on average, returned 10.6% a year, or, after correcting for inflation, has delivered about 7.2% a year. Part of this return shows up as a rising stock market, and part of it takes the form of dividends paid to shareholders.
    Before 1976, there was no way to invest in the entire U. S. stock market, but in August, 1976, the (non-profit) Vanguard Group opened its S&P (Standard & Poors) 500 stock index fund. The Standard and Poors 500 are the 500 biggest companies in the United States, and the Standard and Poors 500 index is a measure  of the average value of their combined stock value, and is one of the major indices cited in the news every day as an indication of how well the stock market is doing. The Vanguard S&P 500 index fund mirrors the value of the S&P 500 index, minus 1/10th% or so per year for administrative overhead costs. For example, between August, 1976, when the fund opened its doors, and August 2006, 30 years later, the total return on the S&P 500 index averaged 12.35% a year. The Vanguard S&P 500 index fund repaid its patient investors at an average rate of 12.15% a year, or 0.2% per year less than the S&P 500 index. (These administrative costs have recently been reduced to the above-mentioned 0.1% a year.) If you had invested your $5,000 of IRA money in a tax-free account in the Vanguard S&P 500 index fund when it opened its doors in August, 1976, you would now have about $165,000, or about 33 times as much as you had at the outset. However after correcting for inflation, you would only have about $42,500 in 1976 dollars, or about 8.5 times your original $5,000 investment.
    OK. Why did the stock market rise at an average rate of 12.35% a year instead of the 10+ % per year that I mentioned above?
    I don't know Maybe the answer is because there was galloping inflation during the early part of this 30-year period. As a result, the actual dollar return was higher than 10+% a year, but after correcting for inflation, the underlying rate of a bit over 7% a year remained the same.
    We would have expected that the stock market would have doubled your money three times over a thirty-year period, 8-folding it. Instead, it 8.5-folded it. Why? I don't know. 
    This means that if you were to invest $5,000 this year only in an S&P 500 index fund that approximately reproduces the S&P 500 index in an Individual Retirement Account (IRA) , it would grow to $10,000 by 2015, $20,000 by 2022, $40,000 by 2029, $80,000 by 2036, and $160,000 by 2043. Table I below shows what would happen if you invest $5,000 every year in an IRA using one of the after-inflation growth rates (12%, 21%, and 28%) I've listed across the top of the table, corresponding to before-correcting-for-inflation rates of return of 15%, 24%, and 31%.
    To say it another way, investing in an S&P 500 index fund, will double your money every 7.45 years, 10-fold it in about 24½ years, and 1,000-fold it in 74.5 years. In inflation-adjusted terms, it would double in 10 years, 10-fold in 33.3 years, and 1,000-fold in 100 years.
    I find it amazing that the U. S. stock market has generated the same 6.8% per year average rate of return on investment for the past two centuries in spite of wars, booms, depressions, and the transition from a frontier, raw-materials-producing economy through the industrial revolution to today's information-processing economy. This 6.8% seems to be an underlying "rate constant" in spite of all the daily and annual economic and stock market turmoil, and its importance to patient investors can't be overestimated. The point is that unless you plan to withdraw your money right now, it doesn't matter what the 
    Things aren't quite as simple as this for two reasons. 
    First, future projections must always be corrected for inflation. Assuming a 3% average rate of inflation over the next 35 years, things in 2043 will cost about 2.86 times as much as they do today. For example, a car that costs $14,000 today might run about $40,000 in 2043. If we correct these numbers for 3% inflation, then your nest egg will double every 10.5 years, yielding, in present-day dollars, about $8,100 in 2015, $13,200 in 2022, $21,500 by 2029, $35,000 in 3037, and $57,000 in 2044 (or $10,000 in 2018, $20,000 in 2028, $40,000 in 2039, and $80,000 in 2047.)
    Second, I'm making the stock market sound like a savings account, and in a way it is, and in a way it isn't. The stock market is an auction in which the average stock price fluctuates over a range of about 2½-to-1 from bull market highs to bear market lows. If you buy your stocks at the top of the typical bull market, you’ll pay about 2½ times as much for the same stocks if you bought them at the bottom of a typical bear market. Your $5,000 stock portfolio may worth be less or more than $10,000 in 2015, and less or more than $20,000 in 2022. However, over a 30-year or longer period, these fluctuations tend to average out. But these are details that I'll discuss farther along in this write-up. The essential point is that the stock market is an effective way to build and sustain long-term wealth, doubling your money in present-day dollars every 10 years..

    This is certainly good, but can you do better? 
    The answer is yes. 
Set It and Forget It: A Sure, No-Brainer Way to Double Your Money After Inflation Every 8¼ Years
    The largest companies in the U. S. grow at the rate of the economy as a whole because, in large part, they are the U. S. economy. However, smaller-company stocks, represented by the Russell 2000 or Russell 3000 indices, are said to rise at an average 12% a year rate. At that rate, after adjusting for inflation, your money would double every 8¼ years.
    Until the last few years, index funds weren't available for indices other than the S&P 500 but now they are.
    Some foreign markets are currently growing faster than U. S. markets. For example, my Matthews India Fund has risen about 54% a year since it was established in November, 2005. This is particularly true225436

 in Latin America, India, China, and Southeast Asia, and there are now indices that mirror the stock markets in these regions and in individual countries. 
    Can we do better than this? 
Set It and Forget It: A Sure, No-Brainer Way to Double Your Money Every 4-to-5 Years
    What would happen if we switched among no-load mutual funds, always investing in the best-performing funds? A woman by the name of Janet Brown tried this. Beginning in 1970, she began publishing an investment advisory newsletter called, "No Load Fund X".
No-Load Fund X
    It worked sufficiently well that the No Load Fund X newsletter is still being sold, and has exhibited a 19+ % per year average rate of return over this 37-year period. ($10,000 invested in this way in 1970 would have grown by now into about $6¼ million, or about $11.8 million after adjusting for inflation.)
The Hulbert Financial Digest and The Prudent Speculator
    In 1980, a man by the name of Mark Hulbert started a kind of "Consumer Reports" testing service for investment advisory newsletters called the "Hulbert Financial Digest". Then, as now, there were numerous investment advisory services making extravagant claims for their capabilities. "Double... triple... quadruple your money in three months!" "Why be poor when you can be rich?" What he found was that these claims were almost entirely hot air. By now, he has been testing investment advisory newsletters for 27 years. Over the past 25 years, the leading investment advisory newsletter has been "The Prudent Speculator", with a 25-year average rate of return of 18.8% a year, followed by "No Load Fund X", with an average rate of return of 15.3% a year (17.8% a year for No Load Fund X' best mutual-fund portfolio--see graph below).

 (No-Lo

Year-by-Year Performance of the Four Classes

* The Compound Annual Growth is for twenty-six years, from 6/30/80 to 6/30/06.
** Class 3 Results are computed by DAL from its monthly Newsletter (NoLoad FundX) and checked by The Hulbert Financial Digest.
Index Returns are from Weisenberger Financial CO

    These two newsletters (No Load Fund X and The Prudent Speculator) and these two newsletters alone have been among the top five, and generally first, second, or third among all the newsletters Mark Hulbert follows (more than 200 at the latest count) for the past 25 years, 20 years, 15 years, and 10 years. (Over these 25-, 20-, 15-, and 10-year periods, other newsletters have made it into the lists of the top five, but they have changed from period to period., In other words, they fail to exhibit the consistent long-term outperformance exhibited by The Prudent Speculator and No Load Fund X.  For the past 5 years, although The Prudent Speculator and No Load Fund X have done as well as ever, other newsletters have temporarily eclipsed them. Probably, though, five years from now, in 2012, these upstart funds will no longer be among the top five funds that the "Hulbert Financial Digest" tracks, and The Prudent Speculator and No Load Fund X will again show up among the top five funds over the 10-year period from 2003-2012.)
    What's so significant about these newsletters is that they have consistently generated these high rates of return over more than a quarter of a century, as verified by an independent testing agency. Both of these newsletters have recently opened mutual funds that should do nearly as well as the newsletters. (Both mutual funds have to overcome a 1.5% administrative fee.) One of the problems with "hot" funds is that they don't tend to remain "hot" over  periods measured in decades. I suspect that there might be several possible reasons for this. 
The Al Frank Fund
    In 1998, The Prudent Speculator established a mutual fund called the Al Frank Fund, named after the newsletter's founder, that seeks to replicate the performance of the newsletter. Of course, as a mutual fund, it incurs 1.63% administrative fee. Hopefully, its managers can invest wisely enough to offset this recurring cost. Otherwise, the mutual fund will deliver 1.63% a year less than The Prudent Speculator newsletter. So far, the Al Frank Fund has quadrupled its investors' money in 10 years, or doubled it every 5 years during a period that included 2 years of the dot-com bubble and a recession and 2½ years of stock market meltdown, so this performance is probably typical of other 10-year periods.
The No Load Fund X Funds
    In 2002, No Load Fund X created several mutual funds that endeavor to replicate the performance of the various No Load Fund X portfolios. Their center-of-the-road portfolio, the No Load Fund X Upgrader Fund (FUNDX), has, like The Al Frank Fund, more than doubled over the past 6 years that it's been in existence.
    At 15% to 16% a year, you'll double your money every 4¾ to 5 years. That means that $100,000 invested in these funds today in a tax-advantaged account will grow to $200,000 in 5 years, $400,000 in 10 years, $800,000 in 15 years, and $1,600,000 in 20 years. It will 10-fold in 17 to 18 years, 1,000-folding in 51 to 54 years. 
In Addition to Accumulating Money Faster at 12% a Year Than at 7.2% a Year, You Can Also Withdraw 12% a Year Rather Than 7.2% a Year!
    Another thing that's wonderful about these funds is that their reliable high rates of return deliver a double-barreled benefit. Not only can you accumulate money faster with them than you can with most other mutual funds: they also allow you to draw out more money--12% a year from them after putting back enough money to offset inflation from them.--when the time arrives to withdraw money. 
    To illustrate this double-barreled advantage, let's assume that you invest your retirement savings in an S&P index fund and you get its long-term-average 7.2%-per-year real rate of growth, followed, later on, when you're ready to retire, by a 7.2% per year payout (after withholding enough to keep the fund up with inflation). If you invested $100,000 this way, then after 10 years, you would have $200,000. (Given 3% a year inflation, you'd actually have $272,000 in 10 years, but it would only buy what $200,000 would have bought when you put your money in the fund 10 years earlier.) At 7.2% per year, you could withdraw $200,000 X 7.2% =  $14,400 a year from this retirement fund. If you invested that same $100,000 in the Al Frank Fund or in the No Load Fund X Upgrader Fund you would have $310,600 at the end of 10 years, and you could withdraw 12% a year from your fund, or about $37,250 a year for your retirement income... 2½ times what you would get from an S&P 500 index fund. If you kept your $100,000 in one of these funds for 15 years, the 7.2% S&P index fund would allow you to withdraw about $20,400 a year in perpetuity, while the 12% funds would generate a $65,600 a year income stream--more than 3 times as much!  (Practically-speaking, you would probably want to save one to two years of income to set aside in a savings or checking account to act as a buffer to to offset fluctuations in the stock market.  Alternatively, you might want to let your fund grow for one to two more years to accommodate stock market fluctuations.)
    A more common scenario might be one in which you invested $5,000 a year in an IRA. In that case, Table I below shows how your money would grow with time. As you can see, it would take you 28 years to reach $1,000,000. (Actually, at 3% inflation, you'd have $3¼ million after 28 years, but it would only buy what $1,000,000 would have bought you when you began your retirement savings program.) At that point, you could begin withdrawing $10,000 a month ($120,000 a year) for the rest of your life, and leave your stash to your children or grandchildren so that they could withdraw their share of your $120,000 a year for the rest of their lives. (If you put your money in a Roth IRA and designate your children or grandchildren as beneficiaries, then upon your death, they can immediately begin withdrawing money from their share of their inheritance tax-free without having to wait until they are 59½, or better yet, they can leave the money in a modified Roth IRA taking out only a couple of percent a year (based upon their projected life expectancy) and leave the rest of the money in there to grow. 
    I'll give an example in a moment, but first, let me point out that you may be able to save more than $5,000 a year.  For 2008, you can save up to $15,500 in a 401k, Roth 401k, 403b, or Roth 403b account ($20,500 if you're over 50). (Unfortunately, with these plans there are constraints imposed by your employer both on the amount you can save, and on the investment vehicles in which you can invest.) Let me also point out that at a 12% annual rate of earnings growth, you can withdraw 1% a month forever from your retirement nest egg. That means that for every $5,000 in your IRA, you can withdraw another $50 a month from it in perpetuity.
    If you and your significant other each saved $5,000 a year in an IRA, you could reach the $1,000,000 retirement target in 22 years.
        I've used $1,000,000 as a bogey for a retirement fund, but $500,000, giving you a retirement income of $5,000 a month, would probably be lavish, especially when added to $2,000 to $3,000 a month in your combined  Social Security incomes. (In retirement, with just the two of you, with your house owned free and clear (no house payments), with no need to save for retirement, with some income tax breaks, with no go-to-work expenses, and with no need for life or disability insurance, you need only a  fraction as much money as you required to support yourselves and your family during your working years. Saving $10,000 a year in IRAs, the two of you could amass $488,000 in 16 years.
    If the two of you together could save $25,000 a year in IRAs and employer-sponsored plans, then you could reach the half-million dollar retirement mark in just 10 years. And if you could both max out your 401k/403b retirement plans $40,000 a year, then you could reach the half-million dollar mark in 7 years.
    Part of the reason this works so dramatically well is the idea that you can earn at least 12% a year on your investments while still keeping them up with inflation and without dipping into your principal. A lot of retirement planning is predicated upon earning 6%, 7%, or 8% a year in retirement, and that only by drawing down your principal.
    There are other second-order benefits to be derived from accumulating money like this. First, in a few years, you would reach the point at which you no longer needed life insurance, and you certainly wouldn't ever need to buy whole life insurance. Second, you would soon reach the point at which you didn't need disability insurance. Third (and best of all), you wouldn't have to worry about losing your job and your earned income. 
    All of this would help a little to offset the money you were saving for retirement.
    Also, at a certain point, you might decide to quit adding additional money to your retirement kitty. Once your savings hit $500,000, adding $5,000 to it would only increase it by 1%. 
    
   
    At 20% per year, you'll double your money every 3¾ years, 10-folding it in 12 2/3rds years, and 1,000-folding it every 38 years.
    In considering these and other mutual funds, I think it's important to note that No Load Fund X depends upon an obviously-sensible market strategy--that of continually seeking out and switching to those no-load mutual funds that have the best current rates of return--and not upon the investment acumen of a particular investment virtuoso. For this reason, I think it has a good chance of continuing to beat the market.
    A word about mutual funds. 
    75%-80% of all mutual funds don't do as well as an S&P 500 index fund. This is because most mutual funds charge about 1½% a year for management fees, which places them below the stock market's average rate of return. However, there are more than 22,000 mutual funds, and 20% of 22,000 multiplies out to more than 4,400 mutual funds that do beat an S&P 500 index fund.. There are many mutual funds
    This is the best I currently know about in terms of set-it-and-forget-it mutual fund investments. For anyone who's working for a living, or anyone who doesn't want to constantly manipulate their investments, these mutual funds are probably the way to go. 
    This sounds good, but can we do better if we're prepared to devote some time to this?
    No Load Fund X has realized a 19.77% return per year on its Aggressive Upgrader Fund over the past 10 years, approximately 6-folding its investors' money over the decade. It requires a subscription to the No Load Fund X newsletter ($150 a year) and switching among no-load mutual funds with a frequency of something like one switch a month. This is something that someone on a job could probably readily do.
    This sounds good, but can we do better?
    Maybe.

Ways to Possibly Double Your Money Every 4 Years
    There are a few families of mutual funds that have funds that have generated 20+% average annual returns over a period greater than 10 years. These funds are about all closed, but the fund families open new funds now and then that are similar to their other funds, and that I suspect will probably return 20+% returns over the next 10 years. Perhaps the best example of such a (closed) fund is the Bridgeway Aggressive Investors 1 Fund (BRAGX). 

As of February 18, 2008, its average annual rate of return was 19.5%. (This is slightly less than 20%, but the stock market is currently down about 17½% from its October, 2008, peak.) If the stock market were at its October, 2007, peak of S&P 500 = 1,575, this fund would have transformed $10,000 invested on 2/18, 1998, into about $66,500 today.
    The Bridgeway Aggressive Investors 1 Fund is extremely popular, and the Bridgeway Funds company had to close it to new investors (though not to new investments by existing BRAGX customers) years ago to prevent it from becoming too elephantine to maintain its extraordinary performance levels. However, in 2002, Bridgeway established the Bridgeway Aggressive Investors 2 Fund (BRAIX) as a clone of the Bridgeway Aggressive Investors 1 Fund, and as you can see, it has done uncommonly well in its own right.

Here again, the fact that the stock market is down 17½% reduces its long-term gains somewhat. If the stock market were at its October, 2007, peak of S&P 500 = 1,575, this fund would have transformed $10,000 invested on 1/1/2002,, into about $25,000 today (1/5/2008). (Note that these results span a 6.125-year period.)

Ways to Possibly Double Your Money Every 3 Years
    . Since these are top-seeded mutual funds, we can be sure that they won't go broke, but will gradually rise over time. Given this kind of assurance, it might be safe to buy more of them on margin, in effect borrowing money to expand our ownership. If we borrow enough money to double our dollar investment in the no-load mutual funds recommended by No Load Fund X, and if we continue to borrow more as mutual funds gradually rise in price, we can square our gains. For example, if, over a 5-year period, our mutual funds double in value, our investment in them will quadruple in value. However, we'll have to pay a percentage of this of this increase for margin interest. The lowest rate of margin interest for accounts containing less than $50,000 of which I'm aware is 7¼ %. That would give us a total rate of return of 19¾ % + (19.¾% - 7¼ % = 12½ %), or 32¾ % per year (neglecting income tax consequences). At that rate, we would double our money every 2½ years, 16-folding in 10 years, and 1,000-folding it in 25 years. (The Fidelity Group offers a 6% margin rate for accounts containing more than $500,000, which would yield a 34% per year rate of return.) In the past, it hasn't been possible to obtain margin loans on mutual funds, but the advent of Exchange-Traded Funds (ETFs) may change that. It should be possible to obtain margin loans funds on ETFs. However, it's also important to note that one can't use IRA funds for margin loans, so margin loans can't be used for retirement funds. (There might be a way around this. I hope to investigate this topic.)

Several Dominant Investment Themes of the Early 21st Century
Alternate Energy and Green Tech  
Globalization  
Resources Plays  




Ways to Possibly Double Your Money Every Other Year
    As discussed above, there appear to be ways to double your money approximately every two years, at least for small amounts of money below $100,000,000 (and maybe, quite a bit below $100,000,000). These proven results depend upon investing your money in micro-caps or perhaps even in “nano-caps”.
    There are other, unproven ways to possibly achieve higher returns which I'll discuss in a further installment.

Ways to Possibly Double Your Money Every Year (for a Few Years)
    


The Growth of a Roth IRA for Different Growth Rates, and the Amount of Inflation-Corrected Income You might Enjoy
     The table below shows the growth of a Roth IRA for three different inflation-adjusted rates of return: 12% a year, 21% a year, and 28% a year, assuming that you invest $5,000 a year in the Roth IRA, . The inflation-adjusted rates of return of 12%, 21%, and 28% a year are obtained after subtracting 3% a year for inflation; the corresponding unadjusted rates of return are 15% a year, 24% a year, and 31% a year, respectively.
Averaging a 12% a Year Real Rate of Return Looks Promising, and Should Be Realizable Without Active Participation on Your Part... i. e., Can Be "Set It and Forget It"
    I feel confidant that you can  realize a 12% real annual rate of return over a period of decades, since this is based upon the 28-year track records of The Prudent Speculator and the No-Load Fund X Upgrader portfolios. Further, if you invest in these two newsletters' mutual funds (e. g., stock symbols VALUX and FUNDX), you'll be able to "set your money and forget it". You won't have to actively shift your money from stock to stock or from fund to fund because the mutual fund managers will do this for you.
    The 21% per year and 28% per year rates of return are based upon less-well established claims, using two or three of the American Association of Individual Investors' (AAII) model portfolios (viz.: O'Shaughnessy's Tiny Titans and the Martin Zweig model), and are much more in doubt.
   We can't all be rich.  I'm sure the AAII approaches would break down if very many millions of dollars were invested in accordance with their guidelines.
The Retirement Income You Can Withdraw Rises as the Square of the Growth Rate of Your Money!
    It's worth noting that the annual and monthly incomes that you can withdraw from your Roth IRA rises as the square of the rate of return. When you double the rate of return, you double the rate of growth of the fund during your contribution  (the buzzword is "accumulation") period, and you also double the percentage that can be removed from it each year without decreasing your principal. So when you double the rate of return from your investments, you quadruple the level of income that you can extract from the fund, while leaving that principal growing at the rate of inflation... a gift that keeps on giving.
A 12% annual rate of return (after subtracting 3% a year for inflation) is about 1.714 times the 7% per year growth rate of an S&P 500 index fund. 1,714 is just about the square root of 3 (1.732), so if we square the gain by withdrawing 1% a year after retirement instead of 7% a year after retirement, we would actually earn about three times as much retirement income as we would if we simply invested our money in an index fund.
    At this point, if you're a knowledgeable investor, you may be saying, "What's this guy talking about? 
    The Annual and Monthly columns show the tax-free annual and monthly incomes you could extract from these Roth IRA's after accumulating money in the accounts for the number of years shown in the leftmost ("Yr.") column before starting to draw it out. For example, if you put $5,000 a year into your Roth IRA for 20 years, and then started to draw it out, you could draw about $4,000 a month tax-free, plus cost-of-living adjustments, forever. (Well, OK--until the sun explodes ,or the stock market quits working properly, whichever comes first.)