Whether you’re saving for retirement or seeking wealth through the magic of compound growth, the “secret” is really just a simple three-step plan:

  1. Earn a decent living and live beneath your means.
  2. Invest that difference automatically, and increase the investment with each year.
  3. Invest in low-cost (0.20% per year or less), passively managed, widely diversified (across stocks and bonds and across domestic and international) index funds that are appropriately balanced for your age.

Which funds should you pick?

My advice is super-low-cost, passively-managed, widely-diversified index funds.

Super-low-cost: means that the OER (Operating Expense Ratio) charged by the brokerage is no more than 20 cents, per $100 invested, per year or 0.20%.

Passively-managed: means that there isn’t a human or team of humans who run the fund trying to “beat the market”.

Widely-diversified: means the fund includes lots of stocks and/or bonds so that you’re not exposed to one particular company.

There’s no need for you to gamble; you’re going to pile up a lot of money playing it safe.

Index funds: try to match well-known stock indexes like the S&P 500 or the MSCI International index.

The managers of these funds don’t try to pick the best stocks; they just try to match these publicly-known indexes as closely as they can.

For the most part, they’re just buying shares in the appropriate amounts; that’s why they can charge so little to their investors.

If you don’t want to pick and choose index funds yourself,

there’s good news,

you can just take your birth-year and add 60 then go to vanguard.com and invest in the Vanguard Target Retirement fund that’s closest to the year you calculated.

That fund invests in stock index funds and bond index funds, both US and International, in such a way that will be aggressive when you’re young and more conservative as you age, which is exactly what you want to do with a long-term investment, and it’ll happen automatically, without you having to keep track of it.

Finally, do it automatically. Figure out where you want your money to go and how you want it invested, then have the money taken out of your paycheck before you ever see it.

This is a strategy that will put you on the path to financial success.

To be honest, if you’re 25 years old now, you’d likely be ticking off your million before you’re 50.

Of course, there are no guarantees in the world, but based on the history of the world economy, you’d be as likely to do better as to do worse.