The Road To Roth IRA Retirement Riches
Opening a Roth IRA is one of the best decisions you'll ever make.
Open one early in life, max out your annual contribution, and put it in a market index fund with reinvested the dividends, and you'll retire with a comfortable nest egg.
Who wouldn't want that?
But, open a Roth IRA early, max out your annual contribution, and invest in the right companies at the right prices, and you'll retire with a fortune...
Which would you prefer?
Most choose the latter option because they want more money in retirement.
But keep in mind, you must be willing to put in the time and effort necessary in order to choose the great companies trading at great prices...
Notice I didn't say, "great stocks trading at great prices"?
That's because in order to be successful, you need to be focused on companies and not stocks.
This is the golden rule for long-term success in the stock market.
As Benjamin Graham, the father of security analysis, famously said:
"Investing is most intelligent, when it is most business-like."
So what does that mean?
It means when you're faced with the prospect of buying a fractional interest in a business enterprise (a stock), you should approach your decision exactly as if you were buying the entire business...
The Million Dollar Question
To illustrate, let's say you had one million dollars. This $1 million represents all your life savings.
A friend approaches and offers you his McDonald's franchise for $1 million. What do you do?
Well, I hope you ask a lot of questions...
What are the revenues?
Where's the location?
Is the neighborhood trending upward or downward?
Is the foot and drive-thru traffic trending up or down?
How long has it been profitable?
How long will it take to recoup my original investment?
And many, many more...
You wouldn't buy a McDonald's franchise without first investigating the prospects of the business and your expected return on investment. So why buy a stock that way?
Yet, this is precisely what most people do.
It would never occur to them to buy an entire business without learning something about it first, but more than often, they won't hesitate to buy a fractional ownership interest in a business without asking anything but the price.
Why is this?
Why do people perform due diligence on life's other business propositions, but purchase common stocks based on hot tips, a gut feeling, or a hunch?
My guess is because it's so easy to get in and out of the stock market.
The idea of buying a McDonald's franchise one day and selling it for 20% more the next day seems unrealistic...
But buying McDonald's stock (MCD) and selling it the next day for 20%?
Well, that seems like a winning proposition to most people!
On the flip side, if the McDonald's franchise falters, you could end up losing everything. But if the McDonald's stock starts to decrease in value, it can always be sold before it reaches zero.
This is the mentality which leads people to purchase common stocks without performing due diligence.
In such a world, purchasing an entire business is correctly viewed as a long-term commitment.
But unfortunately, purchasing a fractional ownership interest in the same business (a stock) is incorrectly viewed as a short-term dalliance.
Don't think that way.
Instead, take this advice. And it's good advice...
If you're not willing to invest your entire net worth in a single common stock and hold that stock for at least 10 years, then you have no business investing a single dollar of your hard earned money in order to own it for more than a minute.
Now, does this mean I'm saying you have to own a stock for at least 10 years before selling?
Of course not.
I'm saying that, before you buy, you should make certain your investment meets this very high personal standard before committing a single dime of your money.
If you feel comfortable enough to put all of your life savings in a single stock and then go on a 10 year vacation and not worry about it, then you've probably found a good investment...
The Path to Stock Market Riches
Once you start to view common stocks as pieces of actual business enterprises rather than speculative wagers, you'll find your investment philosophy is 180 degrees opposite of 95% of the public...
This is a clear sign that you're well on your way to building an outstanding Roth IRA portfolio!
In fact, once you view stocks as shares of ownership in a business, you'll begin to look at your entire financial life differently.
Robert Kiyosaki's bestselling book "Rich Dad, Poor Dad" illustrates this difference in thinking.
If you take away only one lesson from Robert's book, it's these two definitions:
An asset puts money in your pocket.
A liability takes money out of your pocket.
Remember these definitions!
They're the polar opposite of anything you'll find in any accounting textbooks. But your future life will be significantly improved if you simply forget the textbook definitions in favor of these.
After all, you want more money in your pocket, not less. Right?
Do you want to know Robert Kiyosaki's advice?
It's the foundation upon which all wealth is built.
Here it is...
Simply collect assets and avoid liabilities.
This little known secret is the road to personal wealth, but most people remain confused over what's an asset and what's a liability. And that's what holds them back.
For instance, the house you live in is not an asset, even though most people think so...
After all, does it put money in your pocket?
If not, it's not an asset.
Does the house you live in take money out of your pocket?
Even if you own it free and clear, property taxes, insurance, and general maintenance continually take money out of your pocket. So the house you live in is a liability, not an asset.
Could it be an asset?
Rent it out.
If you make enough money from the rent to cover all of your expenses, then your house becomes an asset.
Now, apply the same definition to stocks as well.
Too many people view all common stocks as assets, and that's a problem.
A common stock is nothing more than a fractional ownership interest in a real business, so if you purchase stock in a company with no earnings or declining earnings (assuming there's no prospect of a turnaround), then you're purchasing a liability, not an asset.
Think about it.
If your business has declining earnings or no earnings, that's not good. Such a business is taking money out of your pocket rather than putting it in.
The best you can do is hope some speculator comes along and pays you handsomely for your mediocre business, but that's all you can do - hope.
Despite your hope, the mediocre business is still taking money out of your pocket.
Similarly, if you purchase stock in a company with consistently increasing earnings and/or dividends, then the stock is putting money in your pocket. In such a case, the stock is an asset.
And that's all you need to understand.
Accumulate assets, not liabilities.
That's the road to Roth IRA retirement riches.
The Secret to Stock Market Success
Let's say I introduce you to another person by saying, "This is Mrs. Jones, founder and owner of Nike..." or "this is Mr. Jones, founder and owner of Pepsi..."?
You would probably think both of those individuals don't need to save for retirement.
After all, Nike and Pepsi are enormously successful business enterprises, generating enormous cash flows - more than enough to take care of an individual's retirement needs.
And you would be right.
Most business owners don't need a 9 to 5 job, and they don't need to draw down their savings during retirement either. In most cases, a business owner's wealth increases during retirement as a result of their business growing.
So my question is this...
Why not be just like them?
Sure, Mr. and Mrs. Jones are fictional characters. But you're not.
And Nike and Pepsi aren't fictional companies. They're real companies.
You have the opportunity right now to become an owner of Nike, Pepsi, or a dozen other ridiculously successful business enterprises.
Your doing so is the key to building wealth in your Roth IRA.
If you want your wealth to steadily grow over time, you only have to do one thing...
Accumulate fractional ownership interests in great companies trading at reasonable prices.
In other words, buy the common stocks of great companies, and don't overpay for them.
It's that simple.
But there is one catch.
You need to stick to the plan. Only accumulate fractional ownership interests in great companies trading at reasonable prices.
Never overpay for great companies, and never buy mediocre companies.
And never, ever, ever chase after the latest hot stock tip or speculate on an unprofitable company with the money in your Roth IRA.
Because by law, you're limited in the amount of money you can contribute to your Roth IRA on an annual basis. You need to make the most of that money.
Don't waste it (even a fraction of it) on speculative endeavors. Once it's lost, you can't get it back.
So stay focused.
Invest it all in great companies that aren't overpriced.
If you do that, you'll retire with more money than you'll ever need!
By now, you've already learned more about successful stock market investing than 95% of the general public, so don't stop now!
Learn exactly how to identify a great business...
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