If You Own Only One Investment, Make Sure This Is It
Companies / Investing 2014 Sep 12, 2014 - 04:19 PM GMTBy: Money_Morning
William Patalon III writes: For a change of pace today I wanted to tell you a personal story.
Twenty years ago, when I was working as a business reporter in upstate New York and covering Eastman Kodak Co. (NYSE: KODK) for Gannett Newspapers, I decided it was time to start saving for a house.
So I concocted a plan.
I wasn't exactly getting rich as a journalist, but I was doing okay. Even so, I knew I'd need an actual plan that I could commit to if I really was going to amass the needed down payment.
My plan was simple. In the years that followed, every time my bosses gave me a raise, I started a new mutual fund.
By the time I got a job at The Baltimore Sun in 1998 - and Robin and I moved to Maryland - I had more than $25,000 set aside from this plan and some other money I'd saved. And we could start looking for our first house.
I also learned a valuable lesson: A little discipline can take you a long way.
I was thinking about this the other day when Radical Technology Profits Editor Michael Robinson and I were talking about the "one investment you should never sell."
It's a perfect investment for house down payments, college funds, retirement, a vacation house, a boat or the cruise of a lifetime - in short, the kind of big-ticket purchases that come along a couple times during a lifetime.
Let's take a look...
A "Desert Island" Holding
The investment that we're talking about is the Fidelity Nasdaq Composite Index Tracking Stock (Nasdaq: ONEQ) - an exchange-traded fund (ETF) that mirrors the tech-focused Nasdaq Composite Index.
As we're going to show you, this is a fund that you should be looking to own for many years.
"Bill, this is a great foundational type of investment," Michael told me. "You can use it to build around. You can use it to be the recipient of regular contributions and to achieve some of those long-term 'life goals' you referred to. The shrewdest investors will look at this as an investment they'll want to own for a long, long time - if not forever."
Let's show you what this fund is. Then we'll show you how to use it.
ONEQ is dominated by big-cap tech, of course. Its Top 10 holdings are a Who's Who of tech leaders in mobile, the Web, cloud computing, biotech and e-commerce.
In fact, this ETF is a way to grab yourself stakes in Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), and chip giant Intel Corp. (Nasdaq: INTC). It also includes biotech leader Gilead Sciences, Inc. (Nasdaq: GILD), e-commerce king Amazon.com, Inc. (Nasdaq: AMZN), and social networking icon Facebook Inc. (Nasdaq: FB).
Though ONEQ - by definition - is focused on technology, the fund also provides some nice diversification. The ETF holds about 1,940 stocks, 46% of which are tech related. Consumer cyclicals, financial services, and industrials make up another 25% of ONEQ's holdings.
In the non-tech part of the portfolio, we're talking about such firms as coffee giant Starbucks Corp. (Nasdaq: SBUX), Baltimore-based mutual fund player T. Rowe Price Group Inc. (Nasdaq: TROW), and Peterbilt truck maker PACCAR Inc (Nasdaq: PCAR).
The ETF also holds some alluring midcap stocks, including triple-digit Private Briefing winner NXP Semiconductors NV (Nasdaq: NXPI) and contrarian recommendation Yandex NV (Nasdaq: YNDX), the Russian Internet player.
And if you employ this single fund like I did during my down payment-saving days, you can have the same results - but on a grander scale.
In fact, I like to say that you're putting your savings program on "autopilot."
And if you employ this strategy long enough, and with a great enough financial commitment, you can achieve your goals and even become wealthy - automatically.
Here's how.
Use This Simple Plan to Get In
The best way to capitalize on an investment like this is by "dollar-cost averaging" - a savings strategy that will have you make consistent investments at regular intervals over a long time period. Michael and I also recommend that you start the fund with a decent-sized initial investment.
"As you've said here, Bill, the real beauty of an approach like this is that by making regular-sized, consistently spaced contributions, you'll automatically buy more shares when stocks are cheap and fewer when they are expensive - which is the definition of dollar-cost averaging."
I also like the fact that this particular strategy "drafts" a powerful ally - time.
Some experts would more specifically refer to this as the "power of compounding."
Let's work through an example.
Let's assume a 12% return over 10 years - more than reasonable for a tech-dominated index at a time when you have such powerful converging trends as mobile, Big Data, cloud computing, miracle materials, and innovations in cybersecurity, e-commerce, and biotechnology.
With an initial investment of $100, and a $30 monthly contribution, you'd be off to the races with a very manageable plan. In 10 years, you'd find yourself with $7,387. And roughly half of that - $3,690 - is pure profit.
In 20 years, that same strategy would turn into $30,000 (a $22,717 profit). And in 30 it would turn into $100,000 (an $89,400 profit).
And that's with a small upfront investment and a very small monthly contribution - money you'll never even miss. (Let's be honest... most of us waste more money than that each month - without a second thought.)
Just think what you could achieve with a bigger upfront outlay and a more aggressive monthly investment plan.
If you make the same return assumptions, start with $5,000 (the bigger the upfront investment, the bigger the back-end bang) and invest $50 a month. At the end of the same 30-year stretch, you'll have more than $300,000 in that account.
And here's the key thing to remember: We're recommending this fund as part of your investment plan - a keystone that creates a savings discipline.
Aggressive investors and traders might put as little as 2% into something like ONEQ, while more conservative investors might devote as much as 15% to 20%. We say that because aggressive investors will want to do more trading, and to own more individual securities "outside" this ETF. But conservative investors will feel more comfortable with a more "automated" overall investment strategy.
Remember: This isn't to be your only investment. When you devote additional investment cash to the many recommendations we offer at Private Briefing - and in our many other trading services here at Money Map Press - you can look forward to a future filled with wealth... and achieved goals.
Trust me when I tell you that this is a pretty satisfying view of the future.
I feel that same "satisfaction" every night - when I make that right turn into our driveway after the long day at work.
I set a goal back when I wasn't pulling down a very big salary.
I'm confident you folks can do much, much better than I did.
And all our experts here at Money Map Press will be proud to help you get to where you want to go.
In fact, it's our heartfelt wish that, years from now, you'll look back on this column in a special way. We hope you remember it as the day you set out to become wealthy - automatically.
Source : http://moneymorning.com/2014/09/12/if-you-own-only-one-investment-make-sure-this-is-it/
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