Can you make 1 Million before retirement?

 Today I woke up and the sun was shinning with such an intensity that reminded of my purpose 1 Million € in less than five years. As you all know I have been writing about this topic since the start of this blog, I picked a number often cited by financial planners that seemed like a nice, round target. I said getting there would require buying stocks and mean accepting some risk, at a time when neither was very popular. I tried to be realistic, but I hope it made $1 million seem not so out of reach

Those not born in that 1977-to-1994 window aren't off the hook, either. For the more seasoned out there, especially baby boomers who have postponed saving for fast-approaching retirement, a similarly aggressive strategy will be needed to make up for lost time.

Is this doable? I think it is. But it will require more diligence, dexterity and determination than was required in the go-go 1980s and 1990s, an era the entire financial advisory industry and its "buy and hold" mentality remains fixated on. And it will require people to end their long love affair with bonds, because those supposedly reliable fixed-income assets look set to under perform for years to come.
First, let me address the elephant in the room: skepticism that this is even possible, and a creeping feeling that unless you're a Wall Street trader or a hedge-fund jockey, the system is hopelessly stacked against you. Because paralysis is not going to get anyone to1 Million.

At the moment the Stock Market is not an option

It's easy to forget, with all the emphasis on CEO pay, banker bonuses, insider trading, scandals, fraud and such, (read my previous post) but half of the stock market's two-part mission is to help average people build wealth, provide for their families and save for retirement.

 (The other half of the stock market's mission is to funnel wealth to entrepreneurs and fast-growing businesses. I'd argue it's failing here as well -- witness the recent string of failed initial public offerings and the accumulation of idle cash on the books of America's largest companies -- but that's a story for another day.)
The stock market is also the institution by which the social contract of capitalism -- that while not all share in the spoils of growth equally, all can participate in it -- is made manifest.
Yet, by just about any measure you'd care to use, Wall Street has been failing the average investor miserably for more than a decade. No wonder the Occupy Wall Street movement generated so much heat before the chill of winter and the holidays set in. This is a clear example to join stable markets for example the Finnish Stock Market, in which I feel extremely confident. The North American Stock Market seems to be on deep troubles according to The Standard & Poor's 500 Index is trading at levels first reached in 1999 and has been drifting sideways ever since, in a stomach-churning, dream-crushing trading range.

Even accounting for dividends, the S&P 500 continues to flirt with levels reached in the closing moments of the 20th century. But over this same period, the U.S. economy has grown by 21%, or $2.3 trillion. Corporate profits have trebled to a record $1.5 trillion. Average investors just haven't gotten their cut. Income inequality has returned to Progressive Era extremes seen before Presidents Woodrow Wilson and Theodore Roosevelt reeled it in with stiff taxes and new social programs. Poverty is on the rise. Wages have stalled. Labor force participation has fallen to 30-year lows. Food stamp usage is off the charts. And inflation has devalued the power of the dollar by 34%.

Now, there are exceptions. Small- and mid-cap stocks have done well despite suffering two round trips to late-1990s levels during the 2001 and 2007 recessions. So have bonds, which are putting the finishing touches on a 30-year bull market. But these are nuances, and I don't think they reflect the realities for typical retail investors engaging in a buy-and-hold strategy focused on the largest, "safest" companies.
So what are people to do? As I've suggested in the past, one of the few ladders left with which to climb the social strata is to become a business owner and participate in the growth of the economy. Direct entrepreneurship is the best bet. But indirect investing in the stock market remains my best alternative.
Moreover, for those angry at the growing wealth of the top 1%, a majority of their riches are tied to business equity. In short, they own stocks or similar assets. If you can't beat them politically and through the tax code, join them.
If none of that convinces you, keep in mind that with the Federal Reserve pushing both short- and long-term interest rates toward zero, and into negative territory after adjusting for inflation, there are few good long-term alternatives for savers. Very few people can save $1 million from their paychecks before retirement if they're earning only 1% or 2% interest.

Solid returns are our only hope or not

Let's run some numbers to illustrate how retirements live and die based on investment returns. Yes, saving, reducing debt and controlling expenses are important. But they merely get you in the game. The big swings hinge on average annual returns.

Retirement-saving success can be boiled down to a three-way formula: You can work longer, save more of what you make or earn more on your current investments. Asset allocation -- owning stocks, bonds or something else -- is the most critical part of that equation.
Let's work a quick example: Take a 30-year-old earning $35,000 a year who has no assets and wants to retire at age 65. If our example invests in corporate bonds offering a yield of 4.5% right now, that investor would need to save 41% of his or her income to reach $1 million at retirement -- a nonstarter for most. The percentage would be higher for an older investor or for someone trying to do it using bank savings accounts paying minimal interest.
But thankfully, we are in the midst of one of those rare moments when "safe" assets such as bonds are the "risky" ones -- in the sense they have become overbought, offer yields that don't compensate for inflation and risk, and have limited potential for gains.
At the same time, stocks are coming off of their worst run since the 1930s. In the years that followed the 1930s low, the S&P 500's 10-year total return peaked at nearly 600% in 1959. Meanwhile, bonds were ravaged after the Federal Reserve used negative interest rates (as we have now) to help the government cut its World War II debts by transferring wealth, by stealth, from savers to the Treasury.
Stock market investors, on the other hand, enjoyed an average annual return of 19.4% over the period. For the sake of illustration, that 19.4% return means a 30-year-old investor could save just 1% of his or her income and still have $1 million by age 65.
Obviously, this number represents the peak 10-year return; over the long term, don't bet on it.
What should you expect? Well, the S&P 500's average annual return on a total-return basis since 1800 is around 9%. For safety's sake, I'd dial that down to 7% or 8% when doing your retirement math.
The numbers aren't necessarily pleasant to look at. At 8%, that same 30-year-old worker would have to save 19.3% of his or her income every year to hit $1 million by 65. With a 7% return, the worker would have to save 24% of income; a 9% return would mean saving 15.4%.

 I didn't say it was easy. I said it was possible. Particularly if you consider that you'll probably have more than one job and multiple sources of income, and get a few raises over the years. But the bottom line is that your best chance -- maybe even your only chance -- to earn these returns is in stocks and stock funds, and the diversity of ideas that you can find by reading this blog, lately I got into a new system which leaves aside all the stock market and focuses mainly on loans with a 10% to 15% return in the short run, it is so simple that the idea is booming and something great is coming out of it.

Investors, especially those who still believe in buy-and-hold or who lack the time to actively trade, will still need healthy amounts of diligence and care as the financial world moves ever closer toward one of the two  following outcomes:

• The stock market remains range-bound for another decade or more in a repeat of the 20-year stagnation of the 1960s through the 1980s, mimicking Japan's recent malaise.
• Bonds end their multi decade rise on a combination of higher inflation, a workable solution to the global sovereign debt problems and corporate leveraging, providing the raw fuel needed for another secular, long-term bull market in world stocks.

The second, of course, makes that $1 million look much more possible. The first makes it very tough, requiring a much more active approach to investing. In any market, some stocks do go up -- but in a range bound market, finding them is hard work that really pays off.

This binary outlook goes a long way toward explaining why Wall Street has been so jumpy since last spring as the spectrum of possible outcomes for mid  2012 and beyond has narrowed into what seems like a black-or-white choice. All types of assets -- from currencies to commodities to stocks across the sector groups and even Treasury bonds -- are rising and falling together as computers trigger buy and sell orders in microseconds based on the latest headlines and rumors.
No wonder that, according to Merrill Lynch calculations, more than 80% of hedge funds have returns that are over 70% correlated with the S&P 500's volatility measure, the CBOE Market Volatility Index. In other words, hotshot traders who are supposed to be able to make money in any market are instead bobbing up and down along with everyone else.

 I want to share with you all the latest info graphic for Americans on how to save some taxes at the end of this page and  I also want to  thank Michael Weinberg founder and CEO of  "Wizpert" for adding me to Wizpert,  a fast growing community of experts, where users seek advice on an array of topics, including personal finance.

One last final idea...we all need to stop consuming 100 percent of the time and add some value to society by producing something, impact and effect millions= make millions. Let´s keep moving.

Why I Am Leaving Goldman Sachs

Normally I never accept the offer to publish an article that has been published before, the times that we are living require special attention, systems and processes to make things happen are evolving in such a way that we tempt to lose control and consciousness, it seems that we are just machines dominated by external influences but I know we can stop it and we can still make Millions with a human side and soul.

I got an email and a request to publish the following article in my blog the pay came within but the pay in this case is not as important as the message, we are just around the corner getting ready to celebrate Summer once again another year of full celebration and joy let´s all keep smiling, investing and making our dreams come true. Enjoy!

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

A version of this article appeared in print on March 14, 2012, on page A27 of the New York edition with the headline: Why I Am Leaving Goldman Sachs.