A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

EXERCISE 1: GATHER THE
NECESSARY SUPPLIES
A widely held belief is that the tickets to a comfortable
retirement and a fat investment portfolio are instructions on
what extraordinary individual stocks or mutual funds you

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should buy. Unfortunately, these tickets are not even worth
the paper they are printed on. The harsh truth is that the
most important driver in the growth of your assets is how
much you save, and saving requires discipline. Without a
regular savings program, it doesn’t matter if you make 5
percent, 10 percent, or even 15 percent on your investment
funds. The single most important thing you can do to achieve
financial security is to begin a regular savings program and to
start it as early as possible. The only reliable route to a
comfortable retirement is to build up a nest egg slowly and
steadily. Yet few people follow this basic rule, and the
savings of the typical American family are woefully
inadequate.
It is critically important to start saving now. Every year
you put off investing makes your ultimate retirement goals
more difficult to achieve. Trust in time rather than in timing.
As a sign in the window of a bank put it, little by little you
can safely stock up a strong reserve here, but not until you
start.
The secret of getting rich slowly (but surely) is the miracle
of compound interest. Albert Einstein described compound
interest as the “greatest mathematical discovery of all time.”

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It may sound complicated, but it simply involves earning a
return not only on your original investment but also on the
accumulated interest that you reinvest.
Jeremy Siegel, author of the excellent investing book
Stocks for the Long Run
, has calculated the returns from a
variety of financial assets from 1800 to 2010. His work
shows the incredible power of compounding. One dollar
invested in stocks in 1802 would have grown to almost $11
million by the end of 2009. This amount far outdistanced the
rate of inflation as measured by the consumer price index
(CPI). The figure below also shows the much more modest
returns that have been achieved by U.S. Treasury bills and
gold.