The idea's not so far-fetched. The number of high-net-worth individuals -- those with $1 million or more in assets other than their primary homes -- passed 3 million in the United States. That's about 1% of the population, which means a millionaire is probably living within a slingshot's range of you. You could be the next one in your neighborhood.
DailyFinance attended the conference for the World Wealth Report, researched by Merrill Lynch Global Wealth Management (BAC) and Capgemini, and asked some big shots there and elsewhere what it takes to become a millionaire. The advice was rich in common sense.
"Contribute to your 401(k)," recommended John Thiel, the head of U.S. Wealth Management for Merrill Lynch. You heard the man. Your 401(k) wants to kiss and make up. It knows it betrayed you during the, um, misfortune. These things happen. But now is the time to reconcile before you do something rash. It's free money, out of the purview of the taxman. "You're taking advantage of time," Thiel told DailyFinance.
Get back into the market. Are you satisfied with the microscopic interest rates you're getting on your CDs and savings accounts? Go where the rich are going. Many of the new millionaires in 2010 reached the seven-figure mark by taking on more risk in equities, the study said, and more are expected to do the same in 2012. Small cap stocks have been a good choice -- they've outperformed the biggies for several years. Such trends can reverse, but we're just sayin'.
Ultimately, common sense will prevail. Merrill's Patrick Dwyer, whom Barron's rated as the top financial adviser in Florida in 2010, said, "Becoming a millionaire with your personal investments is less about making the optimal investment and more about avoiding the common mistakes: leverage, over-concentration, and a lack of patience."
Be passionate about building wealth. It's time to scrap the "aw shucks, who needs money" routine. Educate yourself. Hire some help if need be. A financial adviser can keep you from panicking when the market stinks and from being blinded by euphoria when it soars, said William A. Lorenz, managing director of the Central/Southeast Division for Merrill Lynch Wealth Management. "It's important to stick with your game plan. There's good days and bad days and good months and bad months, but it's all about having a plan, sticking with it, and having the fortitude to stick with it."
Start saving young. The 4% increase in millionaires 45 years old and younger since the 2008 crisis underscores the importance of socking some assets away as soon as possible. Pay yourself first, Thiel said. The more money you can save while you're wet behind the ears, the better. Living with mom and dad right after college isn't a bad idea as long as you have a plan to move out, Slater of UBS noted.
Think about foreign investments. Household goods and foods and beverages in countries such as Brazil, China and India have the potential for healthy profits, Slater said. If you're feeling skittish, note that emerging markets beat the world by 8% in 2010. For the sake of balance, maybe let overseas market ventures occupy 20% of your portfolio, Slater recommended.
Take your time in choosing investments. This gets back to the Warren Buffett Invests Like a Girl philosophy, which you might have read about. Women tend to be far more deliberate in researching stocks, and that has proven to be a winning strategy, Thiel said. Female millionaires grew by 3% since the nation openly wept over our gutted portfolios in September 2008.
Just trying to becoming a millionaire is a good start. It's one goal where falling just short won't hurt so much.