The death of the ‘Millionaire Next Door’ dream

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"The Millionaire Next Door"

In 1996, "The Millionaire Next Door" hit the bookstores. Its co-authors, academics Thomas J. Stanley and William D. Danko, found that most of the millionaires in the research they conducted shared seven common traits. These traits can be summarized as follows:
  1. They live well below their means.
  2. They allocate their time, energy, and money efficiently.
  3. They value financial independence over the display of wealth.
  4. Their parents encouraged them to be economically self-sufficient.
  5. They encourage their adult children to be economically self-sufficient.
  6. They target market opportunities.
  7. They chose the right occupation or profession.
The model described in the book does work. Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflation rate. It does produce millionaires.

https://www.latimes.com/business/hi...lionaire-next-door-dream-20150310-column.html

This article is from 2015 and one of the author's key points is that we're never going to see the equity market booms of the 80s, 90s, and 2010s ever again. The example is that $100 in 1979 turned into $2000 in 2015... but that's only 8.5% annual RoR. I'm not sure whether it's real or nominal; depends on whether their dollar amounts are inflation-adjusted.

In 2015 it was tempting at that time to say the next few years are going to look different than the past few. P/E, the CAPE, the Buffet indicator all point to market peaks! That was wrong, of course. S&P 500 is up 125% since then, for a 17% nominal RoR. Which is double that 8.5% in case it was also nominal.

However keep in mind, "the millionaire next door" in 1996 is "the $1.73-millionaire next door" in 2021. Or more: CPI numbers just came on 8/11/21 at 5.4% (https://www.bls.gov/news.release/cpi.nr0.htm).

The CPI being that high (and being unsurprising) is supportive of the equity market continuing to do well over the next decade-plus.... so INVEST, INVEST, INVEST.

For active day traders running automated trading robots, our trading servers will get you <1ms latency to CQG

upload_2021-8-12_6-18-16.png
 
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If an investor does his research and buys a basket of well-selected emerging market stocks, that are quantitatively cheap, I would not be at all shocked if they can compound at 15% per annum for the next decade....maybe also adding a commodities momentum strategy to the portfolio would be a good idea as well.

I think it will be much harder to achieve the same results in developed markets over the next decade.
 
Ninja Mobile Trader VPS said:
https://www.latimes.com/business/hi...lionaire-next-door-dream-20150310-column.html

"The Millionaire Next Door"

In 1996, "The Millionaire Next Door" hit the bookstores. Its co-authors, academics Thomas J. Stanley and William D. Danko, found that most of the millionaires in the research they conducted shared seven common traits. These traits can be summarized as follows:
  1. They live well below their means.
  2. They allocate their time, energy, and money efficiently.
  3. They value financial independence over the display of wealth.
  4. Their parents encouraged them to be economically self-sufficient.
  5. They encourage their adult children to be economically self-sufficient.
  6. They target market opportunities.
  7. They chose the right occupation or profession.
The model described in the book does work. Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflation rate. It does produce millionaires.

This article is from 2015 and one of the author's key points is that we're never going to see the equity market booms of the 80s, 90s, and 2010s ever again. The example is that $100 in 1979 turned into $2000 in 2015... but that's only 8.5% annual RoR. I'm not sure whether it's real or nominal; depends on whether their dollar amounts are inflation-adjusted.

IMO it was tempting at that time to say the next few years are going to look different than the past few. P/E, the CAPE, the Buffet indicator! That was wrong, of course. S&P 500 is up 125% since then, for a 17% nominal RoR. Which is double that 8.5% in case it was also nominal.

"the millionaire next door" in 1996 is "the $1.73-millionaire next door" in 2021. Or more: CPI numbers just came in at 5.4%.

The CPI being that high (and being unsurprising) is supportive of the equity market continuing to do well over the next decade-plus.

For active day traders running automated trading robots, our trading servers will get you <1ms latency to CQG

View attachment 265694
More...

"Spend less than you make" should be a no-brainer.
 
If there's one thing I've learned over 25+ years of trading and investing it's that people (no matter who they are) are terrible at predicting the future. Compounding is hard for the general population to wrap their heads around......how could a loaf a bread cost $10, that's ridiculous.
 
Ninja Mobile Trader VPS said:
"The Millionaire Next Door"

In 1996, "The Millionaire Next Door" hit the bookstores. Its co-authors, academics Thomas J. Stanley and William D. Danko, found that most of the millionaires in the research they conducted shared seven common traits. These traits can be summarized as follows:
  1. They live well below their means.
  2. They allocate their time, energy, and money efficiently.
  3. They value financial independence over the display of wealth.
  4. Their parents encouraged them to be economically self-sufficient.
  5. They encourage their adult children to be economically self-sufficient.
  6. They target market opportunities.
  7. They chose the right occupation or profession.
The model described in the book does work. Spend less than you make, invest the excess in long term assets that have compounding interest rates above the inflation rate. It does produce millionaires.

https://www.latimes.com/business/hi...lionaire-next-door-dream-20150310-column.html

This article is from 2015 and one of the author's key points is that we're never going to see the equity market booms of the 80s, 90s, and 2010s ever again. The example is that $100 in 1979 turned into $2000 in 2015... but that's only 8.5% annual RoR. I'm not sure whether it's real or nominal; depends on whether their dollar amounts are inflation-adjusted.

In 2015 it was tempting at that time to say the next few years are going to look different than the past few. P/E, the CAPE, the Buffet indicator all point to market peaks! That was wrong, of course. S&P 500 is up 125% since then, for a 17% nominal RoR. Which is double that 8.5% in case it was also nominal.

However key in mind, "the millionaire next door" in 1996 is "the $1.73-millionaire next door" in 2021. Or more: CPI numbers just came on 8/11/21 at 5.4% (https://www.bls.gov/news.release/cpi.nr0.htm).

The CPI being that high (and being unsurprising) is supportive of the equity market continuing to do well over the next decade-plus.

For active day traders running automated trading robots, our trading servers will get you <1ms latency to CQG

View attachment 265694
More...
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Good points;
that book is also a fun read. They also repair shoes + have low or no mortgage.
Typical media [LA Times] pattern\ they tell why it will not ''never/LOL'' happen a
gain.LOL
But Investors Business Daily[LA newspaper/weekly] is full of ways to do it...........................................................................................................
 
R1234 said:
I think the exclusive club now is >$10M
More...

While the millionaire described in the story had $8 million in assets, you will find almost no one "next door" with 10 to 100 million or a 1 billion. That level of wealth requires a return on investment that can't be achieved using the earn and save model. It usually requires creating/controlling an assets that can grow in value many orders of magnitude faster than the stock market (real estate, businesses, intellectual property).
 
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