Paul S. feels like a genius.
"I am absolutely bragging," he told my research team shortly before a presentation I gave in California two years ago. "I feel like I have to, because what's happened to my retirement prospects is both wonderful and amazing at the same time."
Paul should feel terrific. He's managed to nurse a retirement nest egg that's now pushed past half a million dollars, and multiplied itself three times over in the process…
…in only 11 years, at a time when the S&P 500 returned only 8%…
…despite the fact that he's not a stock-picking savant…
…using just the plain-Jane mutual funds in his company retirement plan.
As soon as he explained his journey, I just knew I had to share it with you.
Here's how to multiply your money for retirement – in a few short years if you have to.
Double Your Retirement Stash – Even Under the Worst Market Conditions Imaginable
Imagine beginning your investing career at the worst possible time.
That's what Paul did in May 2001, right before the full fury of the dot-bomb crash hit and gave the Dow a 21% buzz cut in only 21 months.
BOMBSHELL: Inspector General audit reveals you may be owed as much as $23,441 in underpaid funds. Click here for the story…
Despite the panic all around you, you faithfully contribute a few hundred dollars to your 401(k) each month. What's more, you have the guts to increase the amount you invest a little each year as your career progresses.
Then, after a few hopeful years during which the markets show signs of life again, the global financial crisis hits, and all your gains are wiped out. From September 2007 to March 2009, the Dow loses an astonishing 55% of its value.
A global recession, a near-debt default by the U.S. government, an increasingly ugly geopolitical outlook… all those factors and more conspire to drag down markets so hard and so fast that the S&P 500 returns just 1.56% from May 2001 to May 2012.
Like millions of investors, you want to throw your hands in the air.
Only, you can't.
Every time you look in the mirror, you see a huge Cheshire Cat-like grin on your face.
By May 2012, you've stashed away $150,000 of your own money and gritted your teeth every time you put more money in the markets at a time when other investors are too scared to look at their statements. Your retirement account balance reads well above $500,000.
Yes… half a million bucks!
And you didn't do it by picking out only the best stocks – or stocks at all, for that matter.
Rather, every dime of the $150,000 you stashed away over 11 years went to mutual funds offered by your workplace retirement plan. There was nothing special about them, either.
In fact, many of those funds managed just single-digit returns over that 11-year bear market, if they appreciated at all. They certainly weren't enough to bring your retirement nest to the half-million dollar mark.
So what's the secret?
What's powerful enough to bring about your market-smashing advantage?
(Hint… it's the same three things Paul figured out.)
Dollar-Cost Averaging: Powerful for What It Doesn't Allow
If you're disciplined enough to save even a relatively small percentage of your paycheck each month for a retirement account, you can buy into stocks you want to own a little at a time over time. You wouldn't believe how many investors don't even know this is possible!
That's the essence of dollar-cost averaging and why it's one of my favorite Total Wealth Tactics.
Suppose you're automatically deducting $200 a month to send to fund XYZ to save for retirement. In June, the fund is trading at $50 a share – you snatch up four shares.
In July, it's down to $45 a share – a more than 10% discount. You purchase 4.44 shares.
By December, let's say the market continues to slide. The fund is down to $40 a share. Where you could only afford to buy four shares a month, you can now afford five – and your retirement deductions scoop up the extra shares automatically.
Two years later, the economy might be humming along, and the fund could be trading at $60 a share. You'll buy some more shares each month, but fewer as the price trends higher. And because your goal should always be to buy low and sell high, buying more shares at lower prices – and buying fewer at higher prices – is always a good thing.
That's extremely important, because it helps you build wealth quickly, which is something most investors don't realize.
There's a second benefit that could be even more powerful.
Cut Out Emotion and Supercharge Your Returns
In my Total Wealth research service, we've talked many times about how emotional decision-making can devastate an investor's portfolio. Studies have shown that emotional interference takes a terrible toll that can cost investors hundreds of percent in lost opportunity during their investing lifetime.
According to the latest Dalbar data, that could be as much as 190% over a typical investors' lifetime. I don't know of anybody who can throw that kind of potential away – yet millions do.
That's why, if you conquer emotion as an influence when it comes to your investing decisions, you can expect to boost your returns by 190% – the chance to almost triple your money.
As tantalizing as that is, I'll be the first to admit that banishing emotion is more easily said than done – even if you understand the stakes intellectually. Even I struggle with that at times myself, despite having a thorough grounding in the data and 35 years of experience in global markets.
Dollar-cost averaging helps remove emotion from the equation, because investors are understandably less nerve-wracked when they're never risking a large amount of capital at once. In fact, they're more likely to celebrate a market downturn than join in with the herd's panicked selling.
This is all the more important, because every so often (about once every 3.5 years, according to Capital Research and Management Co.), we get a reminder that markets don't go up as consistently and linearly as we'd like when they tank.
These reminders are particularly painful if you've just worked up the guts to buy in.
That was the case for millions of investors in August 2015 (right before a 10% correction) or October 2011, right before a painful 15% market dip. And I probably don't need to remind you how things felt in the months after September 2008, when the Dow lost 55% of its value.
Paul described how he watched his retirement balance shed $100k as it dropped from $250,000 to $150,000 in the dark days of 2008 to 2009. Yet, despite the fact that he felt terrible, he didn't join in the stampede to sell.
STRANGE BUT TRUE: The Social Security Administration has been collectively shortchanging tens of thousands of recipients out of millions of dollars…
With his 401(k) worth more than three times as much now, he's very happy he didn't.
Going to the sidelines, you see, may feel good, but then you've got two problems… a) missing out on a chance to "buy low," and b) trying to get back in.
Missing an opportunity is always the more expensive proposition.
An Ironclad Retirement Rule: Accept Free Money
According to the American Benefits Council, 80% of working Americans in 2014 had access to some kind of employer-sponsored retirement plan.
Many include matching, meaning your employer will match your contribution up to a specific limit – up to 7% of your paycheck pre-tax is not uncommon, to give you an idea.
This means that, if you earned $1,000 each pay period in gross income and automatically deducted 6% pre-tax to stow away in a 401k, your account would grow by $90 each pay period. That's an automatic 50% return on every dollar of yours that the company matches. And it's one that makes almost any seemingly underperforming investment downright appealing, even under the worst possible investment conditions.
Now, you may be thinking that your employer match isn't quite as generous – or maybe it doesn't exist at all.
It's still in your interest to save money in a 401(k), since that money is tax-deferred and will likely be taxed only when you're retired, and then at a lower tax bracket to boot.
At the end of the day, I want you to take away two key thoughts that are especially important at the moment.
First, it is absolutely possible to build tremendous wealth using the best tactics even under the worst conditions.
And second, you can do this.
Just as Paul did.
I'll be with you every step of the way.
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About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.