You’ve probably read a lot recently about 401k millionaires. Ordinary people who saved money over decades now are ready to retire with ease.
Smart investing? Usually, no. In fact, most of the people who are now rich thanks to 401k plans did so with hardlly any investing at all.
Sure, they owned investments. Typically they put money into stock mutual funds from a small menu of fund choices.
So how did they end up millionaires? By not actually trying to invest and instead focusing on saving money.
Billionaire Mark Cuban, who made his money in tech investing, totally agrees.
Cuban is better known these days for being the animated sideline owner of the NBA Dallas Mavericks. Millions more know him as one of the “sharks” on the CNBC show “Shark Tank.”
The hit show’s premise is simple: A small group of self-made billionaires dole out advice to hopeful entrepreneurs and compete to invest in their ideas.
In my MarketWatch column this week, I share advice Cuban once gave that actually is the total opposite of “Shark Tank” but nonetheless a radical approach to getting rich.
Invest steadily over years in low-cost index funds, Cuban says. That’s how America’s many 401k millionaires did it, and it’s how Cuban once thought he would someday retire, too.
The concept that Cuban understands intimately is compounding, how money grows dramatically the longer you save.
Lots of 401k millionaires were at one time just ordinary employees putting aside a small percentage of each paycheck.
The trick is, they never stopped saving.
They gave up money today in exchange for far more money later on. The gift of compound interest turns modest contributions into major retirement funds later on.
You can do what 401k millionaires do. In fact, anybody can be disciplined at growing your savings, as Cuban explains.
“I think that’s possible for everybody. I’m not saying that it’s easy, particularly if you have a family,” he says.
“But if you can find that discipline, then you can save.”