| The simple, stress-free way to create wealth and | | | | bonds and 10% to cash. |
| retire early. | | | | Next, now that you've picked your asset |
| It's not hard to turn thousands into millions if you'll | | | | allocation, open an account with a low-cost index |
| only step back from the frenzy of the stock | | | | fund family such as Fidelity, Vanguard or T Rowe. |
| market and march to a different drummer. The | | | | This will keep your costs to the bare minimum, |
| first thing you have to observe is that most | | | | and will avoid falling into the trap of having |
| people lose money in the stock market, they | | | | someone else manage your money in a |
| don't make money. They lose money through | | | | hyperactive manner. Instead, your money will be |
| commissions, buying on hunches, selling on | | | | in funds that are designed to mimic a major |
| emotions, and generally being 'hyperactive'. | | | | market index such as the S&P 500. |
| Hyperactive investing is not how you get rich. You | | | | Now it's time to pick your specific investments. |
| get rich by learning from the rocket scientists | | | | Don't get me wrong - you're not going to pick |
| who study the financial markets and help create | | | | individual stocks. Instead, we're talking about how |
| computer models for the billion dollar hedge funds. | | | | much of your stock dollars go into domestic |
| What do these PhD. 'quants' have to say? | | | | funds versus international, or large cap versus |
| There are just a few simple rules to follow to | | | | small cap. Similarly, you have to decide which type |
| create true wealth the low-stress way. First, your | | | | of bond funds you'll pick. |
| returns actually do not depend on picking stocks. | | | | Lastly, rebalance your allocation of funds once |
| Your returns depend on allocating your assets the | | | | every year. Some of your investments will have |
| right way - over 90 percent of investment | | | | grown faster than the others and it's time to sell |
| returns are determined by how investors allocate | | | | a portion off to bring them back into the target |
| their wealth, versus picking stocks or timing the | | | | percentage allocations you chose. This way you |
| market. Asset allocation is how you divide your | | | | automatically sell a portion of your winner |
| investment portfolio among three types of | | | | investments when they are high - capturing the |
| investments - stocks, bonds and cash. For | | | | returns and putting them into lower-priced asset |
| example, if you want maximum growth with no | | | | categories - whose turn will come in time. |
| increase in risk, allocate 70% to stocks. 20% to | | | | |