My parents and I used to watch a 1950s-era TV show called

The Millionaire

. Each week we watched the unhappy story of someone's life, secure in the knowledge that at any moment, Michael Anthony, representative of the mysterious benefactor John Beresford Tipton, would show up and present this person with a check for $1 million, changing that life forever.

Back when the show aired, $1 million was a lot of cash. I got to thinking about that when I read the question posed by

Orphan Trader

in our "Start Investing" community. Suppose you had $1 million to invest and you wanted to earn 26% for 30 years to reach $1 billion. What would you do?

Orphan's question elicited all kinds of responses. As

Quasimodo

pointed out, earning 26% a year for 30 years is, by almost any standard, an unattainable goal. Still, the question made me wonder: How much money is enough? And how does your investing style change once you get there?

Many More Millionaires

A million bucks used to seem like pie in the sky to most Americans. But with 401(k) plans and other tax-deferred investments, it is increasingly doable, particularly for those who have managed to get an early start socking money away. Nearly every day now, we get someone like

Bethany

in the community who is still under 35 and already has a nice-sized portfolio. These folks should hit $1 million -- no problem.

How will that change them and their goals? Having some money typically changes your notion of whether you are conservative or aggressive as an investor. And I think it should. Young people who are just beginning to invest often call themselves conservative, when what they really are is uneducated. Retired people who no longer have an income often call themselves conservative, when what they really are is vulnerable.

But it is those with few assets who need to be most aggressive in building a nest egg. So it is that young people just starting out need to

dollar-cost average into stock funds. And even retired investors need to keep some money in stocks for growth unless they already have more than enough.

More Cash, More Conservative?

Paul Sage

and

Edwin Selvig

, though both retired, still invest aggressively in stock mutual funds. The other day,

Scott McMillin

opined that the more money you have, the more aggressive you can afford to be. I argue just the opposite: The more money you have, the more conservative you can afford to be. But I guess it works both ways. In fact, the more money you have, the more you can afford to be any way you want.

If

John B.

had $1 million, he'd buy certificates of deposit, go fishing and "you'd never see me on this message board again," he says. But

Andy 326

reminds us that a million bucks ain't what it used to be. He and his wife could not live on the income from $1 million, he says: "There is no fixed-income investment on $1 million that would cover our annual living expenses."

So what Andy would do is put 20% of the $1 million into aggressive stocks, 40% in the

S&P 500

, probably at

Vanguard

, and the other 40% in the

Nasdaq 100 Trust

(QQQ) - Get Report

. That's a pretty aggressive portfolio!

"When we hit $10 million, I would transfer the bulk of it to an income-producing investment and keep the rest in aggressive stocks," Andy said. Then he and his wife would retire and visit the great castles of the world.

Richard Jenkins, one of our Microsoft MSN "MoneyCentral" editors who is quick with the numbers, pointed out that a 20% return would turn $1 million into $1 billion in 38 years, providing nothing was lost to taxes or transaction costs.

Exchange-Traded Funds

His investment choice would be the exchange-traded funds, or

ETFs, on the

American Stock Exchange

, because expenses are so low. Richard would be happy to learn that

Barclays Global Investors

introduced a dozen more of the ETFs on June 16, and that by July 15 there will be a total of 57 Barclays ETFs on the American Stock Exchange. All of them invest in the broad market, in particular sectors like financials, telecommunications, the Internet or in foreign countries.

But Richard acknowledges that 20%, too, is unrealistic. 10% is more like it, he says, and 10% over 35 years would turn $1 million into $32 million -- or $26 million after paying a maximum capital-gains tax that, beginning next Jan. 1, drops to 18% for assets held over five years. That's still a nice stash of cash, and would even cover the needs of Andy 326 and his wife.

To see how the interplay between time and return play out, investors use a handy rule of thumb called "The Rule of 72." If you pick an annual rate of return and divide it into 72, the answer will show you how long it will take your money to double if you earn that return.

So let's try it. If you earn 3% on a bank savings account, your money will double in 24 years (72 divided by three). If you earn 20%, your money will double in 3.6 years. Many investors assume they can get 10%, and so believe that their money will double in roughly seven years. That's the rule of thumb I hear most often when talking to professional investors.

So that million bucks would grow nicely over 40 years, which means that if you're in your 20s and you've already accumulated a million bucks, you can do almost anything except spend it or bury it in your back yard and still be just fine for retirement.

You could still make do with relatively conservative returns on your retirement nest egg if you're in your 40s. Even up to your early 50s, I think. But beyond that, you'd have to invest in stocks if you were to make the money grow for retirement.

By chance, just after I read Orphan's question, I saw an article on the MSN home page that asked this question: "Can you be too rich?" According to the story, the answer is yes. Studies show that prosperity isn't bringing security and happiness, but instead is making people more anxious, and that the more you have, the more vulnerable you feel. So we don't want to focus totally on our bank accounts.

My Plans for My Million

But what would I do with the million bucks? I think I'd be more conservative. We are each a product of our own experience. My husband and I had some pretty rough financial times when our kids were little and we lived in New York City. There were years when we just couldn't set aside money for retirement. When we could, we knew it had to work hard and we invested in stocks. But when I get to $1 million, I suspect I'll throttle back.

The other day, for example, I got a call from a rep at

Charles Schwab

telling me about a money market fund that yields 6.01% for investments of $25,000 or more. That's pretty tempting.

I'm not one of those folks seeking early retirement. I love to work and plan to continue for a long, long time. So if I had that $1 million, I guess I might put $500,000 into the Schwab money market account, which would yield $30,000 a year to invest in growth stocks. The other half would go into the mix of stocks I have now -- mostly technology and health care, some energy and developing markets and a couple of value funds. Which brings me back to what I called the "barbell strategy." In fact, I could see moving gradually to an even-safer stance -- something like Edwin Selvig does, putting 70% of his money (a percentage equal to his age) in Treasury bonds and the other 30% in aggressive stock mutual funds.

One thing seems pretty clear, however. If any of us are going to be millionaires, or just put aside enough for a comfortable retirement, we're going to have to do the job ourselves. John Beresford Tipton is long gone, and even if you are lucky enough to be a contestant on the year 2000 variant of that old TV show --

Who Wants to be a Millionaire

-- you've got to answer some tricky questions from

Regis Philbin

.

Follow Mary's Start Investing Portfolio at MoneyCentral.

Mary Rowland is the Start Investing columnist for MSN MoneyCentral. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She welcomes your feedback at

mctsc@microsoft.com.

At the time of publication, Mary Rowland owned or controlled shares in the following equities mentioned in this column: the Nasdaq 100 Trust.

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