PRISM: Prioritizing Your Goals

5 Key Insights We Learned From 50 First-Time Millionaires

I'm hoping the link I provided above won't be kicked out by AAII's system. It is exceptionally important for young investors to pay attention to these five elements of successful wealth building.

You don't need any fancy, complicated techniques to become wealthy. You don't have to pay attention to the VIX, moving averages, "investor sentiment," volatility, academic measures of "risk," or all of the similar rabbit holes you can be led down. (Even AAII and PRISM can distract you with meaningless concepts that are NOT important!) Adhering to the five simple things mentioned in the attached Kiplinger's article will get you to a comfortable retirement.

(1) Rely on compounding. Sustained effort over time beats the fool out of always seeking the next short-term gain. The common statement, "It's time in the market instead of market-timing that builds wealth," is absolutely true.

(2) Steady saving and maximizing retirement accounts (especially Roth accounts!), and investing in the lowest-cost funds available within retirement vehicles, is one of the strongest wealth-building activities you can undertake. Take the time to look at the 10-year returns on the various funds in your 401k. You'll generally find that the highest returns are provided by the funds with the lowest expense ratios. Stay away from gimmicks like "target-date" funds! They make money for their managers; not so much for you.

(3) Generally avoiding debt and living below your means are essential concepts. Some debt is okay, such as a home mortgage. But carrying credit card debt is ALWAYS a no-no! Eating your own cooking at home instead of eating out and ordering restaurant deliveries saves money that can compound enormously with time. Silly habits like drinking and smoking (or vaping as the more modern version) are future-wealth destroyers. You don't need an expensive vehicle, especially one that you go into debt to buy.

(4) Educating yourself about how to exercise the other four principles mentioned here is an excellent use of your time and energy. Learn all you can about taxes! Doing your own tax returns not only saves money, but you learn so much in the process that will save ENORMOUS amounts down the road. There's nothing wrong with investing in individual stocks if you know what you're doing. But for novices, and even for many old-hats, low-expense-ratio domestic equity index funds will get the wealth-building job done nicely. You never NEED to venture into individual stocks to build a comfortable retirement.

(5) Instead of regarding wealth as a path to a luxurious lifestyle, it should be valued for deep sense of financial security, stress reduction, and freedom it provides.

For what it's worth, I'm a 65-year-old who has been comfortably retired for well over a decade. I got here by exercising the five principles described above. I highly recommend that any young person trying to get ahead subscribe to Kiplinger's Personal Finance. You will find distractions in it, but you will also find a lot of solid information that can help you if you stick to the five principles listed above.