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Are you investing your money?
December 01, 2020
How much money are you investing?
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QUOTE OF THE DAY
"Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, spends it". ~ Albert Einstein
Your investment nest eggLife is expensive. Everything (almost) costs money. If you are interested in Life Goals, chances are you are ambitious and want to live your dream lifestyle. Travel and adventure take money. Lots of it!
Employment income is good. Money you put aside from your employment income to invest for your future is really good.
By reading books about investing, I learned at an early age that it is mandatory to invest 10% of your employment income to become wealthy. If you want to become financially free in your forties or fifties, 20% or more is essential.
But investing your money isn't enough. - You need to earn a good rate of your return on your money to really grow it.
- You need a long time horizon of 30 or more years for compounding to really kick in
I teach the "RULE of 72" to everyone I can. The rule tells you the amount of time it takes to double your money based on the rate of return you are making:
3% return doubles every 24 years
6% return doubles every 12 years
10% return doubles every 7 years
15% return doubles every 5 years
20% return doubles every 3.6 years
Let's say you invest $ 10,000 and see what it is worth in 30 years.
At 3%/yr, it will be worth $ 24,000
At 6%/yr, it will be worth $ 57,000
At 10%/yr, it will be worth $ 174,000
At 15%/yr, it will be worth $ 662,000
At 20%/yr, it will be worth $ 2,400,000
Let's take the 20%/yr example and look at the impact of time on your $ 10,000 . . .
1 year - $ 12,000
5 years - $ 24,800
10 years - $ 61,900
15 years - $ 154,000
20 years - $ 383,000
25 years - $ 953,000
30 years - $ 2,400,000
35 years - $ 5,900,000
40 years - $ 14,700,000
If you plot this out on a graph, you will see an "exponential growth curve" out starting at the 20 year mark.
To see the results of a $ 1,000 investment, take a zero off all the numbers above.
KEY QUESTION: What risk would you be willing to take to turn $ 10,000 into $ 2.4M in 30 years? Is it even possible?
The reason that the $10,000 in this example grows so much is because of compound interest and the power of time. It takes MANY YEARS before the magic of compound interest to occur. THE ADVANTAGE GOES TO THOSE WHO START INVESTING EARLY!!
Compound interest is considered by many to be the 8th wonder of the world.
Some people take a very conservative view of financial risks when investing their money. For myself, I'm targeting investment returns well above 10%. In fact, my wife and I are currently targeting 20% rates of return or higher in all investment decisions we are making. Some would call us crazy and even foolish but I disagree. Why, because we've done it consistently.
We've been successfully investing for more than 25 years and are seeing the results of all this compounding as we approach our mid to late fifties.
NOW IS THE TIME TO GET SERIOUS ABOUT INVESTING YOUR MONEY. THE LONGER YOU WAIT, THE MORE MONEY YOU ARE LEAVING BEHIND.
How to investWhile we used the services of a financial adviser for more than 20 years, earlier this year we decided to take a more active role in making our own investment decisions.
We couldn't be happier. NO-ONE will take a more vested interest in managing your own money than YOU!
I highly recommend that one of your LIFE GOALS is to start managing your own money and investing it yourself. There are so many great sites for setting up an investment account and buying and selling your own stocks or Exchange Traded Funds (ETF)'s. It is very in-expensive to manage your own portfolio and track it on-line.
By leaving this to someone else, you could be missing out on tens or hundreds of thousands or dollars, or even millions.
Having said this, it may or may not be something you should do yourself. Only you can make that decision for you and your family. Stock investing can be come addictive and you need to sure you have the emotional state to make important decisions with your money and stick to proven principles.
Target high rates of returns by investing in GOOD COMPANIES in growth industries. Invest for the long term, not short term. Most day traders lose money over the long term.
We are currently invested heavily in Tesla Stock and believe in the long term growth potential over the next 10 years. Electrification of vehicles and sustainable energy is the future. Robotaxis are coming. Autonomous driving is just around the corner.
Year to date we are up close to 100%, while taking on a minimum risk exposure from a long term perspective. I believe Tesla will become the most valuable company in the world within the next 5-10 years.
Some of the most trusted wealthy people in the world say to invest in a few good companies in growth industries and let your money grow and compound for the long term. Warren Buffet is one of these people. Think about companies like McDonalds, Apple, Amazon, Costco, Microsoft, Google. These companies are here for the long term and have produced solid and significant returns for their investors.
There are numerous you tubers on line teaching people about how to invest. My favourite currently is Steven Mark Ryan and "Solving the Money Problem". He is focused exclusive on investing in Tesla. There are countless others who recommend other stock picks and have the intelligence and research to back them up.
LIFE GOALS TAKE MONEY. PLEASE TAKE THIS SERIOUSLY AND START INVESTING 10% OF YOUR EMPLOYMENT INCOME NOW.
Use the rule of life 72 and compounding to target the future you desire for yourself. Are you happy with a 5% return over 30 years. 10%, 15%, 20%? Enter this into your own spreadsheet and analyze the different results. It is a balance between risk and reward. Only you can determine your risk tolerance.
When it comes to investing, TIME IS YOUR BEST FRIEND!!
Next newsletter . . .My next newsletter on December 15th will focus on GOAL PLANNING FOR 2021!
To your happy future!!
Brian Klodt founder of the 100 Goals Club
CREATE YOUR HAPPY LIFE! and CREATE YOUR LIFE ADVENTURE! https://www.100goalsclub.com
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