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Another Millionaire Study
Old 03-23-2015, 09:02 AM   #1
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Another Millionaire Study

Another study of Millionaires. This one by Fidelity – egregiously self serving – but reinforces previous conclusions.

https://www.fidelity.com/insights/pe...-a-millionaire
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Old 03-23-2015, 09:29 AM   #2
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It pretty much says the obvious it is that it's easier to be a millionaire if you make a lot of money. I have to question the comment that if they people running the companies aren't millionaires it will be tough to become one with that career. There are a lot of millionaires in the corporate offices and amongst franchise owners of McDonalds but I wouldn't recommend starting at McDs making fries as a way to seven figures.

I'm not sure what they mean with this step. It makes me think they are recommending pork bellies and currency futures rather than a buy and hold diversified strategy. Other than be a key member of a company buyout that seems to be the surest way to the millionaire club.

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Investing style: The emerging affluent invest aggressively, which means taking on riskier investments with the promise of bigger long-term payoffs, and they tend to be hands-on investors, making their own decisions. If it "takes money to make money," for most people that means putting at least some of their money into strategies focused on payoffs sufficient enough to reach their long-term goals.
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Old 03-23-2015, 10:09 AM   #3
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> Investing style: The emerging affluent invest aggressively, which means taking on riskier investments with the promise of bigger long-term payoffs

This could simply mean investing in stocks rather than socking money into bank accounts, rather than pork bellies.

My in-laws were of the "put it in an insured savings account" type (children of the depression). Thankfully, they also bought and paid off a house in California and can easily live off the profit from this for the rest of their lives.
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Old 03-23-2015, 10:22 AM   #4
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This article could also be fodder for the other thread today "Is there a disconnect between real life and the "professionals"?"
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Old 03-23-2015, 10:32 AM   #5
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> Investing style: The emerging affluent invest aggressively, which means taking on riskier investments with the promise of bigger long-term payoffs

This could simply mean investing in stocks rather than socking money into bank accounts, rather than pork bellies.

My in-laws were of the "put it in an insured savings account" type (children of the depression). Thankfully, they also bought and paid off a house in California and can easily live off the profit from this for the rest of their lives.
+1 -- I think the typical person has no idea that there is risk at BOTH ends of the aggressiveness spectrum. Everyone's heard stories of dramatic success and failure of someone who put all their money in super aggressive investments. But you don't hear many stories of someone who left all their money in a conservative 1% savings account and slowly went broke.
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Old 03-23-2015, 01:40 PM   #6
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I think so much depends on decision-making in your 20s... college major, career field, grad school, which Megacorp, work ethic, where to live, kids, debt, LBYM, spouse w/ similar mind-set, etc. FI is not so easy if you make poor decisions early on. Still doable, but not as easy as a 20 year-old with a vision, who made sound decisions, consistent with that vision. The rest is easy.
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Old 03-23-2015, 02:00 PM   #7
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Yeah it's a pretty useless study. I read the 2013 one here
http://www.fidelity.com/inside-fidel...onaire-outlook

Basically it's research into survivorship bias as opposed to a hypothesis tested against a control group with a dependent variable.

Lots of people with all those traits also aren't millionaires nor will they ever become them.

I've never seen a study that starts with a broad sample makes a theory as to what factors predict result and then run it forward.

It's kinda obvious on the math side that "people who spend less than they make are more likely to accumulate 1m than people that don't." But then you have to ask what makes people do that?

Is it highly correlated to salary? Or early savings rate? Or spouse selection? Health? Job stability? Probably a complex combination of those things.

If you've ever looked at things like the marshmellow test with kids... I suspect one trait/predictor might be "delayed gratification."

I learned this the hard way in my early 20s when I had quick financial success followed by rapid collapse. That made me very cautious around what I spent, which job I took, how I invested, etc because the pain of loss was so huge. I would have friitered away my last 5+ years of luck if I wasn't a bit paranoid about losing it and patient around growing it. No more new BMWs and fancy apartments for me thank you.

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Old 03-23-2015, 03:34 PM   #8
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Originally Posted by 2B View Post
It pretty much says the obvious it is that it's easier to be a millionaire if you make a lot of money. I have to question the comment that if they people running the companies aren't millionaires it will be tough to become one with that career. There are a lot of millionaires in the corporate offices and amongst franchise owners of McDonalds but I wouldn't recommend starting at McDs making fries as a way to seven figures.

I'm not sure what they mean with this step. It makes me think they are recommending pork bellies and currency futures rather than a buy and hold diversified strategy. Other than be a key member of a company buyout that seems to be the surest way to the millionaire club.
Agree 100% that Fido's factor of aggressive investing style seems to result from flawed logic. There are always a few big lottery winners, but that does not mean that a study of only those big winners proves dumping your paychecks into lotto tix is the right way to "invest"

But I would not totally discount w#rking the grills at McD as a way to $$ 7 figures. Depends on the attitude and goals. It can be a step on the road to Hamburger U (inc associate's degree), and building a successful franchise business.
McDonald’s ‘Hamburger University’ Is No Joke - ABC News
Many successful business owners, not just in fast foods, started out learning their business from the ground up.
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Old 03-23-2015, 06:34 PM   #9
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Originally Posted by mpeirce View Post
> Investing style: The emerging affluent invest aggressively, which means taking on riskier investments with the promise of bigger long-term payoffs

This could simply mean investing in stocks rather than socking money into bank accounts, rather than pork bellies.
I'm not sure what "affluent" means ($ level) in the context of this thread, but I know a number of multi-millionaires that don't invest in anything but interest bearing bank accounts and CD's.
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Old 03-24-2015, 08:23 AM   #10
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I'm not sure what "affluent" means ($ level) in the context of this thread, but I know a number of multi-millionaires that don't invest in anything but interest bearing bank accounts and CD's.
They might be confusing "affluent" with those with high expenses and not enough base to cover themselves safely.

It would seem to me that your risk should go down as your needs become safely provided for.
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Old 03-24-2015, 09:43 AM   #11
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They might be confusing "affluent" with those with high expenses and not enough base to cover themselves safely.

It would seem to me that your risk should go down as your needs become safely provided for.
If I understand your comments correctly, it's the way I think about age and investing too. Once you are sure (comfortable) that you have enough, why risk it. For me, once I became 100% sure (or as sure as anyone can be) that I had more than enough to cover me for the rest of my life, without having to watch my spend rate or lower my lifestyle, my investments became very low risk.
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Old 03-24-2015, 11:41 AM   #12
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+1 -- I think the typical person has no idea that there is risk at BOTH ends of the aggressiveness spectrum. Everyone's heard stories of dramatic success and failure of someone who put all their money in super aggressive investments. But you don't hear many stories of someone who left all their money in a conservative 1% savings account and slowly went broke.
Sure we do. They start with titles like "401(k)s and IRAs don't work!!" and "Most Americans will never be able to retire!!"

My wife, for example, had all these accounts, but her money was largely sitting in a savings account equivalent before we got married earning less than 1%. She wasn't really aware she was losing money, and she's smarter than the average bear.
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Old 03-24-2015, 01:01 PM   #13
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The article seemed very negative on the potential for an average person to reach $1 million. I call BS. It's not that hard.

For example a 26 yo factory worker making $29,000, getting a 2.7% annual increase, saving 10% in their 401k, getting a normal company match, and earning a return of 6% can reach a million by age 65.
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Old 03-24-2015, 01:12 PM   #14
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Of course, inflation will make that $1 million much less impressive in 40 years.

Unless your numbers were meant to be net of inflation, in which case they are probably too optimistic.

Either way, the point is not the specifics of a million dollars. A person of average means can save a significant amount of money over their lifetime if they are consistent about saving and investing.

Will they be "wealthy"? Probably not. Will they be much more financially secure than the vast majority of people, even people who make quite a bit more than them, income-wise? Yup.


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The article seemed very negative on the potential for an average person to reach $1 million. I call BS. It's not that hard.

For example a 26 yo factory worker making $30,000, getting a 2.7% annual increase, saving 10% in their 401k and getting a normal company match, and earning a return of 6% can reach a million by age 65.
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Old 03-24-2015, 02:28 PM   #15
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There is a cognitive dissonance between what people think it means to have a million dollars, and what it actually means. A million dollars is a convenient number for journalists to throw around that somehow still gets the attention of Joe/Jane Average, perhaps because it is still an amount that most people can't fathom ever having. Yet the historical perception of the millionaire is probably more applicable to those who have $5 million or more, depending on where one lives. Furthermore, and as others have said, $1 million in 40 years or so will be worth FAR less than it is today, just as the same amount today is worth far less than it was only 20 years ago.
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Old 03-24-2015, 04:52 PM   #16
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Of course, inflation will make that $1 million much less impressive in 40 years.
Unfortunately, many things seem less impressive and/or shrink over time. Example,according to one of the on-line inflation calculators, the buying power of a million dollars has shrunk a lot in the past 40 years. What would cost one million in 1975 would cost you about $4,362,000 in 2015.

Of course, in 1975 I was probably making about 20k a year (maybe) and working 50+ hours a week. I was in debt and living paycheck to paycheck.
35+ years later I was making well over 10 times that much, didn't owe anyone anything and quit working.
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Old 03-25-2015, 02:46 PM   #17
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35+ years later I was making well over 10 times that much, didn't owe anyone anything and quit working.
That in and of itself .... is PRICELESS.
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Old 03-25-2015, 03:26 PM   #18
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Of course, in 1975 I was probably making about 20k a year (maybe) and working 50+ hours a week. I was in debt and living paycheck to paycheck.
35+ years later I was making well over 10 times that much, didn't owe anyone anything and quit working.
My numbers are similar, though starting a few years later. I felt the same way, until I did the inflation math. That $20k in 1975 would be over $100k today!
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Old 03-25-2015, 07:50 PM   #19
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My wife, for example, had all these accounts, but her money was largely sitting in a savings account equivalent before we got married earning less than 1%. She wasn't really aware she was losing money, and she's smarter than the average bear.
Good thing you came along Of course, saving money at 1% is better than a whole of people are doing.

I've explained the concept of erosion by inflation to a number of people including college-educated folk and some got the point. But I think at least half didn't really understand. The comment in this thread about an income of $20K in the mid 70's illustrates my point, albeit from a slightly different angle.

I understand that if you have quite a large pile of money relative to your expense needs, 1-3% interest at very little or no risk is fine or even desirable. But I suspect that even within the elite group on this forum, this is the case for only a minority.
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Old 03-25-2015, 09:53 PM   #20
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I think so much depends on decision-making in your 20s... college major, career field, grad school, which Megacorp, work ethic, where to live, kids, debt, LBYM, spouse w/ similar mind-set, etc. FI is not so easy if you make poor decisions early on. Still doable, but not as easy as a 20 year-old with a vision, who made sound decisions, consistent with that vision. The rest is easy.
+1
Excellent Observation!

All 20 somethings should take a course in financial planning so that they comprehend the time value of money at that crucial part of their life.

-gauss
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