I wanted to throw this out there as a quick example mostly for our younger investors who may not appreciate in relation to time how money compounds in real life (hint doesn't feel like a straight line).
Here is an example of a situation a real life investor might experience:
If you take a 30 year old and he/ she starts to invest $1500/ month (18k/ year) for 30 years (until age 60) at a imaginary 8% return per year he/she will end up with 2+ MILLION.
That is the type of example everyone has seen, but here is what most fail to appreciate which makes investing hard for many folks even with the best intentions...
1/2 of that return (1 MILLION) was gained only in the last 7-8 years of that 30 year period. So even if the investor was diligent and did what he/ she was supposed to do they would have felt like they weren't making any progress, i.e. spinning the wheels for the first 22 years or so! In fact, waiting for high growth at the end is NORMAL. Folks get bummed out they aren't millionaires after about 1, 3, 5, even 10 years, but the above person ended up with 50% of all their future money to spend in the last 8 years or so (age 52-60 in this example).
Just an observation that may help others. The point being once you have an set asset allocation your job is just to be a robot and save EACH month over and over again and don't worry about the total $$$ in your accounts. The latter you won't appreciate until the end of the journey (20+ years later from when you started).
If anyone wants to visualize this play with the calculator on the SEC website: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Submitted October 23, 2021 at 11:16AM by 10xwannabe https://ift.tt/3GdWHi6
