Meet the Street: How to Become 'Independently Wealthy'
If you want to become rich, street smarts, book smarts and some hard work will certainly help. But they won't be enough by themselves, says Robert Goodman, senior economic adviser for Putnam Investments and author of the newly released second edition of
Senior Economic Adviser,
Recent Meet the Streets
Jeffrey A. Frankel
Prescott B. Crocker
To move into the ranks of the rich -- rich enough to retire securely -- not only do you have to be smart and work hard, but you have to put your money to work -- as an owner of property, businesses, real estate and, foremost, stocks, says Goodman.
Goodman tells Meet the Street how to invest for the future (ride it out) and what to do during these times of economic turmoil (take advantage of low stock prices, particularly in blue-chip stocks and in leading technology issues). He also says how much better off he believes retirees would be if the Social Security system were privatized (with even just 15% of the money invested in something along the lines of an S&P 500 index mutual fund, Americans could have twice as much money in retirement after 45 years of saving, Goodman calculates).
TSC: What's in the second edition of your book that wasn't in the first edition?
Goodman: When I was writing the book in 1996, the country was mired in budget and structural deficits. All of the things we stated in 1996 are still valid in 2002. But since '96, of course, we've swung into surplus, so we had to expand that chapter to include what happens to an economy when you're generating a surplus.
One of the problems of having a surplus is many people think surpluses are good. Surpluses are not good. They can be as bad as budget deficits. Because of an imbalance in the system, surpluses will weigh the economy down, whereas deficits will stimulate the economy. The problem is deficits
Of course, there've been tax changes during that period,
But the thrust of the book is still the same: that there's a long way to go for the market, given the changed economic structure that we are dealing with, and this economy is extremely efficient and highly productive. The markets, over time, reflect that. The second part of the book deals with the financial planning aspects of it, that is, what does an investor do, given this environment, to participate and ultimately become what we call independently wealthy.TSC: Given the current economic developments with the monetary and fiscal actions of our federal government in response to Sept. 11, is there anything you'd like to add to your perspective? Goodman: It's really very important to understand that the American people have been conditioned by the politicians and by the media to believe that these budget surpluses were good and, by definition, anything to reduce those surpluses was bad. Those surpluses are not good. They are bad. They literally weigh the economy down. If you think back a little more than a year ago, we had three influences that caused this economic slowdown: 1) energy prices were rising, and that acts like a tax increase on people; 2) the
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