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Clear Thoughts
Are you on the list or off the list?
Originally Published Friday, April 1, 2005
| Most millionaire households have one thing in common: they have stayed in the stock market for a long time, even during downturns. How does this relate to our investment philosophy? |
How do you define wealthy? One measure that seems to be a milestone or a statistical list people want to reach is "millionaire."
The number of millionaire households in the U.S. rose in 2004 to a record 7% or 8.2 million households from 6.2 million a year ago. That represents a 33% gain or 2 million new households to achieve millionaire status.
When the Internet bubble burst, followed by the effect of the 9/11 attacks, the number of millionaire households fell. Between 1999 and 2002, 1.6 million households lost millionaire status, dropping the total U.S. number to 5.5 million.
The big question is... how does one get on this coveted list?
Some quick facts:
Millionaire households in the late 1990s that lost their status were not far from the mark. When the economy started to rebound, many were able to rejoin.
Although primary residences are excluded by TNS Financial Services (who conducted the survey) in determining wealth, the appreciation of real estate in second homes helped many households.
Remarkably low interest rates helped households to refinance, reduce their debts and raise their net worth.
We believe the payoff information is:
Most of these millionaires are older, experienced investors who are in the stock markets for the long haul and largely ignored the recent ups and downs.
The researchers noted that the typical household reached the million dollar threshold by sticking to the tenets of long term investing and did not change strategies each time the market moved against them. According to TNS Financial Services, manager of the research program, "We don't see this group's ownership of stocks and bonds change much during downturns. They clearly understand the implications of investing over a long period of time."
Can we all learn from these investors and get ourselves on the list?
Clear Asset Management, is a long-term investment manager; as we look back on March, which was a down month for both the market and our portfolios, we feel this report echoes our philosophy, basically saying it all. Smart and steady, ultimately, we believe will win the race. We are confident that Clear Asset Management's investment methodology can assist many of our investors to get to the next level and many who aren't already there on the list.
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