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MAKE YOURSELF A MILLIONAIRE This page intentionally left blank. MAKE YOURSELF A MILLIONAIRE How to Sleep Well and Stay Sane on the Road to Wealth Charles C. Zhang with Lynn L. Chen-Zhang McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2003 by Charles C. Zhang and Lynn L. Chen-Zhang. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. 0-07-142559-4 The material in this eBook also appears in the print version of this title: 0-07-140982-3 All trademarks are trademarks of their respective owners. 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DOI: 10.1036/0071425594 To our children, our all-time best-performing portfolio, Mitchell and Alex. DISCLAIMER While the information in this book is believed to be accurate, distribution of this material should not be considered an endorsement of any particular investment strategy, product, or service described herein. This information is being provided only as a general source of information and is not intended for use as a primary basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor. Please seek the advice of your personal accountant, attorney, or tax and financial advisors regarding your particular financial concerns. In addition, please note the following: (cid:1) Mutual funds are offered by prospectus only. For more information about individual mutual funds, including fees and expenses, ask your financial advisor or product provider for a prospectus. Read the prospectus carefully before you invest or send money. (cid:1) Loans and withdrawals from an insurance contract may generate income tax liability, reduce available cash value, and reduce the death benefit. Negative performance in the underlying subaccounts of variable insurance products may impact the death benefit. Refer to your individual contract for applicable provisions. Guarantees issued by insurance companies are based on the claims paying ability of the issuing insurance company. (cid:1) Stocks of small or midsized companies are generally subject to greater price fluctuations than large-cap stocks. (cid:1) International investing involves some risks not present with U.S. investments, such as currency fluctuations and other economic and political factors. (cid:1) Interest received from investments in Municipal Bond Funds may be subject to Alternate Minimum tax (AMT). (cid:1) Variable Annuities and Insurance Products are subject to fees and expenses that may impact performance. (cid:1) Most annuities have a tax-deferred feature. So do certain retirement plans under the Internal Revenue Code. As a result, when you use an annuity to fund a retirement plan that is tax deferred, your annuity will not provide any necessary or additional tax deferral for you retirement plan. (cid:1) Options are not suitable for all investors. Ask your financial advisor for an options risk disclosure booklet and read it carefully before investing in options. For more information about this title, click here. CONTENTS Acknowledgments ix 1 The First Step 1 2 An Investor’s Best Friend—Asset Allocation 21 3 Guerrilla Warfare:You Versus Your Portfolio 37 4 I Own That Company! 51 5 The Shopping Mall of Investments 71 6 Help! I’m Running out of Money! 93 7 The Steady Staples of a Well-Balanced Portfolio:Bonds,Cash, and REITS 107 8 When Good Investing Goes Bad 133 9 Harvard,Yale,or Your Local Community College:What Can You Afford? 153 10 Make April 15th Your Favorite Day 169 11 Guarding Against the Financial Pitfalls of Death 197 vii Copyright 2003 by Charles G. Zhang and Lynn L. Chen-Zhang. Click Here for Terms of Use. viii CONTENTS 12 Financial Suits of Armor 217 13 Why You Shouldn’t Count on the Government’s Help for Your Retirement 245 14 Where Do You Want Your Money to Take You Today? 279 15 You Can’t Take It with You 315 Glossary of Financial Terms 335 Index 341 Copyright 2003 by Charles G. Zhang and Lynn L. Chen-Zhang. Click Here for Terms of Use.