Please read The Four Pillars of Investing, William Bernstein, or A Random Walk down Wall Street, Malkiel.

She had been with the IRS for many years and was getting passed over for promotions because she was a woman and becuase she was Jewish. When she retired back in the 1940s her pension was something like $3,000.00 per year.

Anne became the poster child for investing. She saved five thousand dollars and invested it all in the stock market. She invested the money in companies she believed in and understood. Anne lived on a shoestring socking away every penny she could into the market.

When she died in 1995, her portfolio was worth 22 million dollars. Anne gave her entire fortune to Yeshiva University – a college she had never visted – and specifically designated the money to help educate needy young women.

Buy companies you understand, reinvest the dividends, and hang on to them, like Warren Buffet says, “forever”.

The rewards are astonishing.

Bill – I know an elderly person with a net worth around $200,000. She has a monthly income of $1500 (pension and Social Security). She has no debt. She considers herself well-off. She recently moved into a very nice assisted living facility. She will be able to afford this for about 5 years. She is 83 and has some health problems, so she does not look beyond the five years. She lives very comfortably. She never invested in the stock market. All of her money have been in CDs that roll over.

Have you ever thought about a socially responsible index fund like say VFTSX from Vanguard?

It’s a good way to dip your toe in a mutual fund that follows a environmentally and socially friendly fund. It doesn’t include ALtria, Wal-Mart and others. It trades at like $9.91 right now and has a small .25% expense ratio.

Just a thought…

My 80 year-old mother-in-law lives on very little but has investments worth $200,000.00 and swears she’ll never touch them and only takes the required minimum distribution that she has to. She is completely happy and does everything she wants in life.

She thinks she’s wealthy compared to what she was raised on as do a lot of folks in that age group. They all have stories that are pretty incredible to listen to about how they grew up and what their parents did to survive, etc.

It’s definitely worth planning and visualizing what life looks like to you at 70, 80, etc. if you’re reasonably healthy at that point. Where do you live? How much do you travel? How much of a cash burn rate do you want/can you afford? Etc.

I agree with the reader on DRIP’s as a great way to start investing in stocks (see my recent story on DRIP’s. Also I have a article on moving my account from Scottrade to Zecco and pay $0 on stock trades.

I use index funds for 80% of my portfolio and the rest is invested in high quality dividend stocks that I will use for retirement income.

I think I need to sit down and really think about what my goals are. While I desire a certain level of financial security, I am not sure if chasing wealth is what I am all about. How much is too much, and can one ever have enough? Hmm, maybe these are thoughts for another post.

I’ve stumbled across a book called “Index Funds: The 12-Step Program for Active Investors” by Mark Hebner that is pretty good at highlighting the pitfalls of active investment. Take it somewhat lightly because his primary business is selling index fund products, but I think the info inside is actually pretty good. It has a positive blurb from John C Bogle on the cover, so that’s gotta make a few people around here excited ;)

I ended up cashing out all of my stocks and making a nice 30/30/30/10 split between Vanguard domestic index funds, European/Asia Pacific funds, bond funds and REIT funds. I check it once a week to make sure there’s no surprises, rebalance twice a year, and reinvest dividends/gains. It has saved me time, money, and headaches and my returns are better now that I’m not trying to out-Jim-Cramer Jim Cramer.

And Lori, I hear you on the social conscience, but treasury bills are going to support Halliburton, for example – some of that US debt is being incurred to fund a war. I divested my Wal-Mart stock holdings a long time ago because I don’t like what they are doing to their employees, but I fully recognize that my Vanguard index funds hold at least a few virtual shares of Wal-Mart in them. It’s tough to invest in any market with a social conscience unless you’re willing to have a little cognitive dissonance in your life and accept that somewhere, somehow, some of your money is going to bad people doing bad things. It’s admirable that you consider it, though. For a long time I would have invested directly in Landmines ‘R’ Us if the returns had been good enough (fortunately my mindset changed).

I work as an audit consultant for a lot of Fortune 500 companies and I agree 100% – if most investors knew what was really going on in these places they would be uneasy. Maybe nothing technically illegal, but there’s a LOT of pressure to “gently nudge” numbers. Invest in the market at your own risk and recognizing the nature of the beast!

However, if you don’t want to worry about fees, use Zecco.com. If you want to dip your toe into the water and see what it’s like to buy individual stocks, then start with just a single share! Having just started to invest with real money, I have a portfolio of seven stocks, each owning literally one share. I am learning great lessons, and haven’t paid one cent in fees.

What you can do on the other hand is pick and choose the companies you invest in. Instead of a broad index fund that covers the good and bad companies, build your own diversied portfolio. It will take a lot more work, but you can get similar gains without sacrificing your morals.

For instance, you want a piece of the cheap retail market? Go for Costco instead of WalMart, and go for some of the new B corporations instead of the more traditional ones.

Basically, you can have both, a retirement and a clean conscience.