The Little Book of Main Street Money: 21 Simple Truths that Help Real People Make Real Money

Chapter 4. Even the Best Investors Need to Be Great Savers

Thrift Doesn't Come Naturally, So Try Trickery

Give me a choice between some savvy investors and some diligent savers, and I'd bet on the savers every time.

The fact is, committed savers can add so much more to a portfolio's growth. Let's say our savers sock away 20 percent of income each year. That would put them far, far ahead of their fellow Americans, who—as a group—save perilously close to zero. By contrast, if a group of stock mutual fund managers beat the market averages by one or two percentages a year over the course of a decade, the managers would likely be hailed as market-beating heroes. Yet the margin of victory is hardly impressive—and the real heroes would be our diligent savers.

Moreover, for the stock fund managers' success to mean much in terms of dollars and cents, there needs to be a decent sum invested. That, again, is the purview of our committed savers. This isn't a which-came-first-the-chicken-or-the-egg question: Without some initial savings, there is no reward to investing.

Seeking Inspiration

The need to save, of course, doesn't come as a shocking revelation. Most of us know we ought to be salting away more money. We have all kinds of goals that are desperately important to us, including accumulating enough for the house down payment, funding the kids' college, and paying for our own retirement. But despite all of that, we find it tough to knuckle down and sock away the dollars. Looking for motivation? ...