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Investment Research Since 1978

The Riches Your Family Deserves

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If you know how compound interest works, you’re in good company. Einstein referred to it as the eighth wonder of the world. Compound anything at 10% for 60 years and you have 300 times more than what you started with. Do that with your money and you’re a genius.

Time and money are the key ingredients in this magical formula. Unfortunately, you usually don’t have money when you’re young, and you have less time when you’re older. Compounding for 20 years—a long time, no doubt—at 10% gives you just over 6X your money. But it’s not until years 40 (45X at 10%) and 50 (117X at 10%) when compounding really kicks in—and I mean big-time.

You could give this gift that keeps on giving to a grandchild. If you’ve got the money, they’ve got the time. An irrevocable trust where the money compounds untouched for 40 to 60 years would do the trick. Buy the Vanguard Wellington fund or the Vanguard Wellesley fund.

The Vanguard Wellington fund, from its inception on July 1, 1929, has returned 8.29% a year. Not quite 10%. But compounding 8% over 80 years turns $10,000 into $4.7 million. The Vanguard Wellesley fund, from its inception on July 1, 1970, has returned 10.19% a year. Compounding 10% over 40 years turns $10,000 into $452,000.

I think Einstein would agree that’s not a bad way to think about accumulating wealth for your family.

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.

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