How to Get Rich Slowly, But Almost $urely^*

^*Title of a book on investing and decision theory by William T. Morris, now unfortunately out of print.

One of the most important decisions that anyone has to face is how to invest for the future. Things to save for include a home, children's education, ones own retirement. A sound approach to investing for the long term can make the difference between adequate provision for these needs and material want.

Fortunately, young people have many advantages. Your biggest advantage is TIME. Time makes it possible to make somewhat riskier investments (and riskier investments in general have the greater expected yield). For example, at age 20 you have 40-50 years to plan for your retirement, and you can accumulate a considerable amount of wealth in that time. Here are some things for you to consider:

• Be sure to have adequate insurance against a catastrophe that could wipe you out financially. This means: Health insurance, automobile liability insurance, homeowner's insurance (if you have a house), term life insurance (for the breadwinner, and NEVER whole life or other fancy kinds of life insurance). Most people don't need other kinds of insurance. For example, you don't need a double indemnity clause that pays more if you die in an accident than if you die from natural causes. Your family needs enough insurance regardless of how you might die. And, the most important aspect of health insurance is the major medical benefit.
• High-interest debt is the enemy of asset accumulation. Credit card debt is the worst of all. Typically, you pay over 20% interest on credit card debt, so if you have any the very first thing you should do is to pay it off. Paying off a credit card debt is like investing at a guaranteed, tax-free 20% rate of interest.
• Once you've paid off your credit cards, try never to carry a monthly balance ever again. A good strategy is to arrange for the credit card company to debit your bank account for the entire balance each month. Also, consider getting a credit card that pays you a percentage of your charges. And carry a minimum number of credit cards. Most people don't need more than one or two, and too many credit cards is a temptation for trouble. Alternatively, you can use a debit card (but debit cards lack some advantages of credit cards; their protection against loss or fraud is lower, and you lose the "float", or interest on the money in your account that you use to pay the credit card bill; also, banks will often enroll you in an "overdraft protection" program, which allows you to overdraw your account; the catch is that you will be charged a hefty fee for each overdraft, and you will pay hefty interest on the balance until it is paid off.).
• Some kinds of debt can be good. Mortgages make it possible for people to own homes (but stay away from weird mortgages such as got the economy in trouble over the last few years, and don't pay more for a house than it is worth, as measured by what you would pay to rent the same, or a comparable house). Debt incurred to get a good education is an investment that will pay off handsomely. Debt to buy a car may be good, e.g. if the car is needed to produce income. Nonetheless, even good debt should be paid off as a high priority. Paying off an 8% mortgage is like making an investment at a guaranteed 8% interest rate. The monthly payments on a 20-year mortgage are not much more than for a 30-year mortgage, but the total interest paid over the lifetime of the loan is much, much less. A 15-year mortgage is even better.
• Time is your friend, so you should start investing as soon as you are able. If you invested $5,500 per year from age 20 to age 30 (the limit on an IRA) and then stopped investing, at an average 8% return of the stock market your nest egg would be worth $1,350,000 when you are 65. But if you waited until you were 30 and then started investing $5,500 per year at the same rate of return, when you are 65 you would have only $1,030,000 even though you would have invested more than three times as much money. This is the "magic of compound interest."
• Dollar-cost average your stock investments. Plan to invest a fixed sum every month or quarter. When the market goes down, you will buy more shares at a cheaper price. When it goes up you will make money. Dollar-cost averaging will buy you more shares at a lower average price. Pay no attention to the ups and downs of the market! Don't get scared if the market goes down (people panic and tend to sell out at the bottom) and don't get greedy if it goes up (people think there's no top and tend to buy heavily near tops; this is what happened during the recent real estate bubble and collapse). This way you will minimize your risks and maximize your returns. Of course, when you get a raise, you can increase your periodic investment. If you aim to invest 10% of your salary each month, when you are 60 years old you will be glad you did.
• Pay yourself first by making your investments with the first dollars you earn. You will never miss them if you never see them. A good method is to have your mutual fund debit your checking account for the amount of your dollar-cost averaging investment every month.
• Taxes interfere with asset accumulation, so it is a good idea to choose investments that aren't taxed or are taxed lightly. If you have a paying job, a Roth IRA (Individual Retirement Account) invested in an index mutual fund is a wonderful way to accumulate assets. If you put the maximum $5,500 per year into a Roth IRA invested in an index mutual fund, you can expect it to be worth more than $2,000,000 in 45 years when you may be thinking of retiring. $5,500 per year is only $110 per week or a little over $15 per day. Many people spend more than that on frivolous things. Many parents help their children by reimbursing their contribution. This is OK, as long as your contribution is money that you have earned in each calendar year that you make a contribution to your Roth IRA, and assuming your parents can afford it. (This is a good way for parents who might have estates subject to estate taxes to avoid some taxes on their estates, and it is a good thing to think about with regard to your own children when the time comes, because if you follow the advice here you will probably have an estate worth taxing). 
• Another way to shelter taxes is to open a 401(k) plan with your employer. Many employers will partially match money put into a 401(k) account. That's extra free money for you, and you'd be foolish to pass it up.
• You can keep your tax bill low on money you invest outside of tax-sheltered accounts by investing in no-load index mutual funds or exchange-traded funds (ETFs) that track a widely-held stock market index like the Standard and Poor's 500 index. Not only do such funds perform better on average than managed mutual funds (typically the S&P 500 will outperform 80% of managed mutual funds in a given year), but they are "tax-efficient" and do not generate much taxable income, and when you sell them you will be taxed at a special, favorably low capital gains rate. And, you don't have to do a lot of research, so you will spend less time planning investments. There are many good index funds: Vanguard and Fidelity offer funds tracking a number of indexes, and there are also socially-conscious funds like Domini and Citizen's Index that approximate the S&P 500 index. But, keep it simple...the S&P 500 is a good index for the bulk of your investments. Exchange-traded index funds are a good alternative for long-term investors; these cost a small commission to buy, but their annual fees are less. They work best if you are able to buy a largish amount, and index mutual funds work better if you invest a small amount on a regular basis. But check the commission situation, as many online accounts charge remarkably low commissions.
• A recently introduced variation on index funds are "target date" funds that invest in a mixture of index stock funds and index bond funds, and change the proportion invested in each so as to invest more in bonds as the "target date" is approached so as to reduce the risk of the fund, thus making your college or retirement fund less subject to market variations.
• Index funds are very appropriate for long term goals like retirement and your children's college education (start when they are infants!!!).
• Do not invest money that you will need in less than 5 years in stocks or index funds. Keep this money in CD's, or money market accounts. The reason is that although stocks can be expected to provide excellent returns over long periods of time (better than CDs or money market accounts), over short periods stocks are volatile and you could end up with less money than you put in. If you need that money to be there soon, you should not put it at risk. Generally, advisers recommend keeping at least 6 months of income in a savings account "for a rainy day". Some recommend even a year.
• Don't make the mistake of trying to "day trade" or time the market, buying at lows and selling at highs. Very few if any people can do this successfully and consistently, and all you would do is generate commissions for your broker. Invest for the long term, and ignore the daily ups and downs of the stock market. Keep your money invested: People who were out of the stock market for only its best 30 days during the period from 1980-2000, for example, missed 2/3 of the appreciation in the stock market over that period of time (during which the Dow went from 1000 to 10,000). Lots of people were selling their stocks in March of 2009; by the time September rolled around, the market had recovered by 50%, but 2 years later they recovered most of their losses, and by early 2014 the market has more than doubled.
• Don't expect to get rich quick by picking "the next Microsoft". Some lucky people did get rich off of Microsoft, but many more people lose than make money by speculation, as with the recent "dot-com" bubble. A better and far less risky plan is to invest in an index fund or two and let time do the work for you. You may not "get rich quick" that way, but if you diversify into many stocks via index funds you are likely to "get rich slowly, but almost surely." Be sure that money invested for the long term is well-diversified; experts recommend having no more than 10% of your money in any one company's stock. Many employees of Enron lost their entire retirement savings in 2001 when the value of that company's stock plunged from around $90 per share to 25 cents per share. They had invested their entire retirement accounts in that one company's stock. Using index funds will automatically avoid this problem. 
• Don't try to get rich on the lottery or gambling. Games of chance are rigged against you. Your expected net worth after playing the lottery with $40 per week for 40 years is perhaps $80. To get that $80 you will have expended $80,000. Not a very good investment. Invested in index mutual funds, the same $40 per week can be expected to be worth well over $500,000 in 40 years.
• Finally, don't put off the decision to invest for your future. It's one of the most important decisions you'll ever make. "Insure, pay off your debt, invest, and spend the rest."

Resources: There is a very good introduction to investing at www.fool.com. Note in particular the 13 Steps and Investing Basics. I also recommend Andrew Tobias' book, "The Only Investment Guide You'll Ever Need". It's quirky, but the advice is sound, and yes, it is the only investment guide you'll ever need.