Over the last few weeks, we’ve discussed the growing – but hardly alarming – wealth disparity that exists in this country.

Former Labor Secretary Robert Reich – a famous decrier of “economic inequality” – recently pointed out that “Almost 80% of Americans say they live from paycheck to paycheck.”

Polls even show that nearly half of Americans would have trouble finding $400 to pay for an emergency.

That’s surprising, especially in light of the U.S. Census Bureau’s report this month that 2017 median household income in this country was the highest on record at $61,372.

I’m not suggesting that it’s easy for a household to live on this kind of income. But does it make it impossible for someone to set aside $400, even over a period of years?

I mentioned this to a friend, and he insisted that I “just don’t get it.”

(Apparently all those years I spent as an impecunious – but frugal – young man with low income, no savings, no health insurance and a net worth of approximately zero don’t qualify me to understand how people in similar circumstances live.)

So let’s broaden our horizons and take a look on the other side of the globe.

According to Trading Economics, the average citizen in China earned $7,329 in 2017. Yet with no welfare programs or social security system, the Chinese are tremendous savers.

In fact, the country’s savings rate, at 46% of GDP, is among the highest in the world.

The average Chinese citizen is far poorer than the average American. Yet they are more willing to make do with less in order to save for the future.

Many Americans understand that wealth creation begins with deferred gratification – and saving.

Real retirement assets per household are more than seven times higher today than they were four decades ago.

Millions of Americans are getting rich. But millions – who live well above the poverty line – are still struggling.


Overwhelmingly, it’s because they are not living beneath their means – and investing their savings in equities.

According to a Gallup poll from May 2017, the percentage of American households that own stocks has declined from a high of 65% in the pre-crisis year of 2007 to 54% now.

Equities are not just the best path to wealth and the life it affords… for most Americans – especially those who don’t own a small business – they are the only path.

Think that sounds extreme?

Let’s consider the alternatives. Bonds yield 3%, or about 1% after inflation.

Compound your money at a real rate of 1% and it will double… in just 72 years.

Cash yields even less than bonds. (And in your bank account may yield almost nothing at all.)

Real estate is another alternative. But that requires either a very large chunk of money – something Americans living paycheck to paycheck clearly don’t have – or leverage.

As we learned in the housing meltdown a decade ago, borrowed money is a double-edged sword, magnifying not only your gains but your losses.

Real estate also entails brokerage commissions, property taxes, homeowners insurance, maintenance, repairs, utilities and the hassles of managing tenants.

And gold?

Please. The barbarous relic is down roughly a third from its peak seven years ago.

(It’s also worth noting that real estate hasn’t even matched inflation over the last four decades. Some hedge.)

If you understand that cash and bonds give low returns, real estate is costly and complicated, and gold is mostly for wearing or admiring, equities are your only realistic path to financial freedom.

Americans who don’t own stocks have sat out one of the greatest decades of wealth creation in history.

And these folks didn’t just miss the bus. Turns out most of them never even saw it.

Investment advisory firm Betterment recently commissioned a survey of 2,000 people. Forty-eight percent believed the stock market had not gone up the last 10 years, while 18% actually said it had gone down.

The S&P 500, with dividends reinvested, is up more than fourfold over the last decade, and small cap stocks have returned substantially more.

Yet two-thirds of Americans think the market has been flat or gone down over this period.

That’s a shame, especially since investment minimums have vanished, costs have never been lower and putting risk capital to work has never been easier.

If you’re reading this, no doubt you are one of the so-called “elite” who’s actually paying attention.

And you have a tremendous opportunity to help family and friends who aren’t.

The secret to financial success – while taught in few books and virtually no schools – is really no secret at all. It boils down to a simple formula that anyone can follow.

And in my next column I’ll explain exactly what it is…

Good investing,