|
Get rich quick schemes are everywhere. Unfortunately these schemes tend to make their promoters rich quickly — often at the expense of investors. We have warned you of their existence in previous bulletins so be on the look out! There is another way however and one we subscribe to wholeheartedly ...
Albert Einstein is said to have called it the most powerful force in the universe, and John D Rockefeller named it the eighth wonder of the world. We call it ... well you will have to
Compound interest!
Like most things in life that are worthwhile, investing takes time. Time to grow (compounding) and time to recover from downturns (volatility). Why do people regard compound interest so highly? Most of us studied compound interest at school, so we know how it works. But it’s not until you start looking at practical examples that you realise how powerful it can be.
Imagine you are 21 again (you wish!). You decide to invest $5,000 and then add to it at the rate of $1,000 a year — until you turn 30. Then you stop saving altogether and leave your nest egg alone until you turn 65. Let’s assume you earn an average return of 8% pa (after fees and taxes) which you always reinvest. And for simplicity let’s say inflation is zero (so your real return is a healthy 8%).
Now imagine an alternative scenario - you don’t start saving until you turn 31 at which point you put aside $5,000 and add another $1,000 each year until you turn 65. Remember, you are reinvesting income, inflation is zero and you’re getting that 8% pa average return. You figure you will more than make up for lost time by saving harder — ie for 35 years rather than 10 years.
Which is the better strategy?
The ten-year saving plan, in which you will have invested a mere $14,000 (a $5,000 initial contribution then $1,000 a year for nine years) will reap $332,413 at age 65. The 35-year plan, in which you will have invested $39,000 — nearly three times as much — earns you considerably less: $227,077 at age 65. Compounding works so much better when time is on your side.
Remember — it’s not just how much you invest, it’s how long you invest. Volatility with time heals all wounds and a powerful common saying is the investments that have the greatest risk of losing money over the short-term, produce the best return over the long term. Why not contact us today and enrol yourself in a get rich slowly program – we have special incentives from a range of award winning companies. Call us 8004558 or
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
and if you recall this article there is a special prize!
Please send this to my buddy too! |
