**Executive summary:**

- Investing is about setting a financial goal and adopting a plan to meet it.
- Trying to maximize gains is gambling, not investing. Falling into this trap increases risk dramatically and makes it less likely to achieve financial security.
- This multi-part series will discuss 16 example companies as a tortoise on steroids combining dividend income with yield enhancing covered option writing to lower risk while building wealth.

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**The Hares:**

We would all like to be able to brag about investing $1 and getting a return of $1000. Every day, you will find articles right here on Seeking Alpha in the PRO section which claim to offer such opportunities. If this is your goal, may I suggest 23 red on the roulette wheel and letting it ride one time when it hits. This gamble is enough to leverage your $1 to $36 and then that $36 X 36 for a $1296 payout. Playing the wheel is far more likely to lead you to such wealth than trying to make the big quick score in the stock market. Both are gambling, but the risk weighted odds are simply far better at the roulette wheel -- where things are just 37:36 against you on each spin. No potential big score stock pick will come anywhere near offering such a low risk leverage ratio compared to actual odds of achieving that 1000:1 return. Potential extraordinary gains in the stock market always are accompanied by even greater risk. For every Apple there are many 1000s of miserable failures. Even Apple (NASDAQ:AAPL) was a miserable failure for investors over a large part of its history and in fact has never achieved a 1000:1 return for non leveraged investors. The same can be said of Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Facebook (NASDAQ:FB), Yahoo (NASDAQ:YHOO), and most of those 1000s of micro pharma companies, independent oil exploration, and other special situations that are always being touted as ready for a miracle breakout. A rare few companies do indeed achieve that, but not nearly as many as a 2 time repeat of 23 red on the wheel.

So, having relegated the gamblers to the casinos, I will limit the rest of my discussion to actual investors that seek reasonable returns together with limiting risk.

**The Tortoises:**

Historically, equity market investing returns (including dividends) have yielded an average of about 10.5% when the investment window is 25 years or longer. A 10.5% rate of return doubles your equity about every 7 years. Thus a $1000 investment in a whole market index fund held from age 18 will have a value of $133,276 at age 67. Now, if we add $1000 more each year at age 19, age 20, etc, the results by age 67 are dramatic. For each $1000 annual contribution to investments you will find a balance in your account at age 67 of $1,393,046 if you do no better than just equal the average market performance that has been demonstrated through its history.

Is striving to be a tortoise starting to look good to you? Let's consider the risks and deviations from this as seen in the following graphics I have reproduced from the outstanding article on average market returns by J.D. Roth, found at getrichslowly.org. I strongly recommend it as reading for anyone not well acquainted with the history of market returns and variation of them over time).

The following chart shows the likelihood of achieving your targeted rate of return over a given number of years investment window. For example, based on all the ups and downs, bubbles and crashes, the entire history of the market, it is a statistical 100% certainty that you will achieve at least a 4% rate of return if you make a 1 time investment and keep it in the whole market index for at least 10 years, a 96% chance of at least a 6% return, 92% of 8% or better, and so forth.

As J.D. Roth points out in his article:

the chart ... indicate(s) the probability of obtaining a certain return from a $10,000 one-time investment. The top line of each chart indicates the one-year probabilities. So, for example, there's an 55% chance that the S&P 500 Index will produce a 10% return over a one-year period. There's an 85% chance of obtaining that return over a decade. But, historically, there is a 100% chance of earning that return over a 30-year investment career.

As the 3 charts below demonstrate, time is the investor's friend, both in compounding earnings and assuring positive results. The 1 year chart is all over the board, up and down. By 10 years (2nd chart) there are no negative returns, average annualized gains of at least 7% are a statistical certainty. Allowing a 30 year investment window (chart 3) assures that average annualized returns limited to the range of 10% to 14% can be expected.

Before even starting an investment program, be sure you understand the risks and decide if you are prepared to ride out the rough spots. If you cannot sleep at night during the scary times then the investment is not for you. The following table shows annual SP500 returns each year for 1973 through 2012. Will you commit to ride out the worst years without breaking down and abandoning your patient strategy?

(source: moneyover55.about.com/od/howtoinvest/a/m...)

**A Basic Tortoise Strategy:**

It should be obvious by now that being an expert stock picker is not required to achieve success over the long haul by investing in equities. You do not need an expensive advisor. You do not need a clever scheme or inside tipster with tomorrow's blockbuster. In fact, those are all the people you want to stay away from.

I have prepared the chart below to summarize the results of a very modest investment program, one that almost anybody is financially capable of undertaking. Begin at age 18 and simply invest $1000 in a total market index fund that holds shares of all the companies traded on the US exchanges. Three widely respected and low expense fee whole market index funds are :

**Vanguard Total Stock Market EFT** (NYSEARCA:VTI)

**iShares Core S&P Total US Stock Market ETF** (NYSEARCA:ITOT)

**iShares Russell 3000 Index** **ETF** (NYSEARCA:IWV)

Forty-nine years later, at age 67, your $1000 will have grown to $133,276. If you invest $10,000, you will have $1,332,760 when you reach 67. Most 18 years do not have $10,000 to invest, so a simple and affordable alternative this achieves the same result is to invest $1000 each year. Columns B through F show you how your money is growing over the first few years as you add to your nest egg and allow it to compound. The final column shows the total result at age 67, a impressive $1,393,046 waiting for you as you cross the retirement *starting line*.

The power of compound growth at simple average performance based on historical results is very clear. Consider these more subtle points any time you hear the siren call of the 100:1 tip from a broker or friend:

Every one dollar you lose at 18, is $133.28 in retirement dollars at age 67. Contrary to the advice of most experts and financial professionals, you should avoid risk when young and you have many compounding periods in front of you. One dollar lost at age 66 is $1.105 at age 67. Which dollar can you afford to lose with the least ultimate impact? The latter ones of course. So, stick to the low risk road. If you are tempted to take on more risk and a gamble now and then, don't do it with your investment money. And above all, do it with your dollar with the few compounding periods left, not many.

The professionals tell us that we have less time to recover from a reversal as we near retirement. However, this is again, bad advice and not completely true. You may have noticed while reading above that I said you cross the retirement STARTING LINE at age 67, not the finish line. Actuarial statistics reveal that it is more likely if you are alive today that you will live to be 100 than not survive to that age. Given that historical performance shows a 100% probability of full recovery and achieving a 10.5% average annual yield over a 30 year investment window, the majority of your investment portfolio at age 67 will still be working and growing for adequate recovery periods.

In the next installment of this series, I will discuss ways to put your tortoise on steroids to boost yields while providing a moat to protect you when riding out the periods of market downturns. Sixteen specific current real examples of tickers will be discussed in detail to insure a firm understanding of how to become wealthy while reducing market risk.

I hope you will join me as I detail the use of covered option writing on quality dividend income equities to develop a model portfolio for the Super Tortoise. Simply click on the bold link labeled FOLLOW above the title at the top of this article to get an email notice of my new articles when they are published.

*Disclaimer: I am not a licensed securities dealer or advisor. The views here are solely my own and should not be considered or used for investment advice. As always, individuals should determine the suitability for their own situation and perform their own due diligence before making any investment.*

**Disclosure: **I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.