# Succeed in Stocks Even if you Don’t Know Where to Start

## Requirements

- Basic reading and Arithmetic.

## Description

I recently interviewed one of the three most **famous** value investors in the world. The first **two** are Warren Buffett and Charlie Munger.

Mohnish Pabrai draws **wisdom** from both. He describes a **librarian** who died with an estate of $4 million. The librarian **donated** it to the University of New Hampshire (UNH) in 2015 according to CNBC.

Mohnish explains that any normal eighteen-year-old with very few skills who can only get a minimum wage job can make it.

The young McDonald’s worker earns minimum wage of $15,000 for 2,000 hours of work per year. He can save ten percent because he is **living** at home and contributing 90% to the household budget.

The young man sets aside ten percent of $15,000 before **taxes** each year. The 18-year-old **saves** $1,500 each year into a Roth (after taxes) or employer sponsored IRA (before taxes).

This is a **conservative** example. The young man (for ease of example) does not get a boost from employer matching if he saves in an employer sponsored 401(k). This would allow him to save much **more** .

He earns 9% on a simple investment choice. His income rises modestly with **inflation** . For instance, if inflation is 2% this year he will save $1,530 in the **next** .

When he **retires** 50 years from now at the age of 68 he will have saved $75,000 over the years from his salary.

At 9%, the account **doubles** every 8 years as per the rule of 72. The approximate time to double an account is the number 72 divided by the rate of return on the investment.

**How Much Does $75,000 of Drip Savings Grow at 9% in 50 Years? Answer: $1,332,662**

Bankrate website has a **calculator** that shows that this scenario will produce a retirement account for the unskilled, minimum wage 18-year-old of $1,332,662.

**Is this reasonable?**

The most **respected** textbook on investments is “ **Essentials of Investments** ” by professors Bodie, Kane and Marcus. The chapter on portfolio theory **reports** that a portfolio of small U.S. stocks returned 11.80%, large U.S. stocks returned 9.62%, and world stocks 9.21%.

These are the geometric mean **returns** that investors enjoyed from 1920 to 2010 in the stock market.

A simple exchange traded fund such as the **Diamond —** **SPDR Dow Jones Industrial Average (DIA)** would have allowed this unskilled 18-year-old to capture a large stock return of 9.62% over that period.

The financial **success** of this 18-year-old comes from the power of compounding over a long time. The Pabrai fund has generated average **returns** of about 15%.

This higher return would generate a $12,450,561 **portfolio** for the eighteen-year-old. A difference of just over 5% produces a fortune nearly **ten** times greater!

**-Doc Brown**

**P.S. Enroll in this essential community on stock investing now.**

## Who this course is for:

- All saving heads of households should take this course.