If by age 30 a person were to put 10 percent of their monthly income into savings, by age 65 that person would be a millionaire. However, with every five years that pass, that person would have to double the dollar amount each month to reap the same gain.
According to John Shao, chief investment strategist for John Shao Portfolio Management, the key to investing is starting early.
People who are 65 and older are financially insecure, in general, Shao said. They have to rely on the government for their income, their Social Security.
Many people, after raising children and sending them to college, find themselves at 45 or 50 years old, just beginning to prepare for retirement, and that's too late, he said. And at 65, when people really begin to worry, there's no way to recover those years, which is why he stresses to start early. While it can be difficult to pass on the big-screen televisions, PS2s, flat-panel computer screens and the like, Shao said it takes discipline to prepare for those golden years. And this may be difficult for the up-and-coming generation often dubbed the throw-away generation.
Once a person starts saving, putting money in the bank or a CD, he said, will not benefit anyone in terms of reward. The interest in CDs is just enough to cover inflation.
The person needs to invest wisely, which means doing their homework to find a good financial adviser.
There are so many choices with advisers, he said, which may make it difficult to choose. The best way to find a good adviser is to ask people you trust, like your CPA, attorney, family or friends, Shao said. It's more important to ask for names of advisers than to ask for names of stocks to buy.
This, he said, is because - as in any profession - there are those who will work for you and those who will work for themselves. For instance, he said, it is easier to set up a financial investment firm than it is to open a barber shop.
To become a financial adviser, there are fewer regulations and requirements than there are with opening a barber shop.
All you have to do is pass your examinations, rent space and have your cards printed, he said. You don't have to go to school.
Shao, however, is not one of those advisers.
Shao, who grew up in China, holds a PhD in finance and a master's degree in statistics, an MBA in international business and his bachelor's degree is in electrical engineering. He relocated to Dallas in 1985 and finished his education in 1991. Since then, he has been teaching finance at Oklahoma City University, and he has been managing investments since 1992.
His fee-based firm provides investment consulting services and portfolio management for investors. Unlike the bond broker, who helps a company or local government issue bonds by identifying investors, Shao's firm works strictly for the investors.
His Oklahoma City-based firm recently received recognition from two companies for its accomplishments. Money Manager Review, a San Francisco-based company that analyzes the performance of private money managers, listed Shao's firm third among its survey of U.S. equity multi-cap growth managers for 10-year annualized returns and 13th among managers for one-year annualized returns as of Dec. 31, 2003.
And Effron-PSN ranked the firm among the top 10 All Cap Growth investment managers, also known as Top Guns, which marks the second quarter Effron-PSN has recognized the firm. …