Quote: (01-26-2018 01:39 PM)worldwidetraveler Wrote:
I still wonder why people follow normal conventions for retirement.
They say to live below their means. They say save, save, save. People put time into research and managing their investments. They do that year after year after year to retire with maybe a million or two.
They do all of that instead of putting time into making more money whether it be with more lucrative skills for higher salaries or side businesses.
Do I really need to spend a ton of time maximizing the return on my investments if I have a lot of cashflow coming in where a percentage point or two wouldn't really matter?
For a small percentage of the population, you may be right. For the vast majority of people, putting your savings to work is far more important. Albert Einstein once said “Compound interest is the eighth wonder of the world.” See the example I cited above regarding someone who can live better making 30% annually on a $100k investment versus someone who makes only 2% in a money market account on a $2 million investment. For another example, see this article ("spooze" = S&P 500):
Quote:Quote:
Take Warren Buffet who has managed to compound capital systematically and consistently for 52 years.
Here's a guy with a simple strategy whose company's stock has delivered about 155 times the total return of the S&P500 — and that includes dividends generated by the stocks in the S&P.
Here's the dirty details...
The "spooz" has enjoyed annualised returns averaging 9.7% including dividends since 1965 when Buffet took the reigns of Berkshire Hathaway.
Uncle Warren, for his part, has generated 20.8% per year. But it's the consistency really that allows for compounding to work its magic. For example, 10 grand invested in the "spooz" each year saw you come away with US$10,970, on average, after one year. On the other hand, Berkshire would have grown to US$12,080. That's only a thousand bucks. Big deal!
The big deal is, of course, compounding because that same 10 grand in the "spooz" is today worth roughly US$1.3million. And yet the same 10 grand invested into Berkshire is worth nearly US$200million. That's somewhere between "Oh, quite a bit more" and "Holy shit, is it that much?"
https://capitalistexploits.at/2018/01/wi...mpatience/