Chances are that if you're reading this book, you have decades before you retire to grow your assets, which is certainly enough time to create a substantial nest egg. In the world of investing, there's nothing more important than long stretches of time to make your assets grow.

For instance, if you put $1,000 into savings today and earn 6 percent per year (after taxes and fees), in 10 years you'll have made a 79 percent return; in 20 years you'll have made a 221 percent return; and in 40 years your gain will be 928 percent — and your initial investment will have grown to $10,280! If you earn 8 percent every year for 40 years, your $1,000 initial investment will grow to be $21,720 — which shows you how much difference 3 percent can make.

These kinds of potential returns make investing starting as soon as possible the only feasible way for most of us to retire or even be considered rich.

Investing to Make Large Payments

You may have definite savings goals at any age beyond accumulating funds for retirement — like putting your child through college or making a down payment on a home. The earlier you start saving, the better. Once you've accumulated funds, your best bet for securing and increasing your return is to segregate and earmark a portion of your investment portfolio to cover this expense.

If you have 15 years to save, high-risk investments for the first 12 years will create maximum return. Reallocating those funds to low-risk investments — such as bonds, and relatively safe larger-capitalization international and domestic stocks — for the last three years of the saving period will decrease risk and guarantee that you can pay for college or buy your dream home according to plan.

Creating a Diversified Portfolio

Your money will grow faster and you will take on less risk if you maintain a diversified portfolio. Diversification should be done both across asset classes — investing in stocks and bonds and within asset classes — putting money to work in large and small stocks, and low and high-quality bonds.

Stock Category Risk Levels

The asset classes below are arranged descending in order of risk — higher-risk investments on the list will tend to have higher returns. Treat the list like a buffet menu. Make your portfolio more diversified, and more palatable, by choosing a range of the assets listed.

Based on past returns, the first group of high-risk investments will probably return 8 to 11 percent in the long run before taxes and fees. The second group will probably return between 7 and 10 percent in the long run. The final group, a collection of bonds and money funds, will likely return somewhere between 3 and 7 percent in the long run. If you want to earn 8 percent or more in the long run, keep the amount of your portfolio in lower-risk assets to a minimum.