Back in 1964, I began a lifelong mission as a disciple of compound interest investing. In those earliest days, home base was Clayton Securities at 147 Milk St. in Boston’s financial district. By 1971 I had gotten into institutional trading and research with Model, Roland & Co. on Federal Street. My first accounts were Fidelity Investments and Wellington Management. Today, over 50 years have somehow flown by, and I am still doing business, a whole lot of it, daily with Fidelity (my family investment firm’s custodian) and Wellington (my own account’s largest positions). Wellington, … [Read more...]
Tax Season Is the Perfect Time To Teach the Grandchildren About Money
It’s tax season, why not show your grandchildren how to keep more of what they make? First, tell them about tax-deferred accounts, and then explain to them the power of compounding. Look at the difference between Grandchild A, whose grandparents explained the power of compounding and saved early and often, and Grandchild B whose grandparents only started saving later. Action Line: Save early, save often, and start saving now for your children or grandchildren. As you can see in the table above, if you start early, it doesn't take a lot to deliver the rewards of compounding to your … [Read more...]
Warren Buffett and the Power of Time
You have read here about the power of compounding, and patience. Both are functions of time. Warren Buffett calls investing over a long time horizon the "Methuselah Technique." Jason Zweig reports in the Wall Street Journal: This Sunday, Warren Buffett turns 90. The chairman of Berkshire Hathaway Inc. BRK.B -0.18% is one of the most successful investors of all time, having amassed a net worth estimated at $82 billion. Yet he accrued nearly 90% of that sum after the age of 65. Investing well is important, but investing well for a long time matters even more. “I’ve long recommended,” … [Read more...]
For You I Want Steady Income and Here’s Why
When you own an income-producing asset, you’re immediately in a position to harness the power of compound interest. Too often, investors get caught up in the ups and downs of the market rather than the flow of cash into their pockets. The basic premise behind selling at higher prices means you need to get rid of your asset, your golden goose, to make money. I don’t like that game for you. For you, I want steady income. Take care of the income, mix in some time, and the price will follow. I like this wonderful piece written at Vanguard that lays it all out. The more time you have, the … [Read more...]
The Power of a Compound Interest Table
Compound interest was described as the greatest mathematical discovery of all time by Albert Einstein. Compound interest “Tis the stone that will turn all of your lead into gold,” according to Benjamin Franklin. The late great Richard Russell explained compound interest as the royal road to riches. Below I'll explain this powerful investment tool and show you how to read a compound interest table. Compound interest is the heart and soul of investing. Investors lacking a solid grounding in compounding are more likely to suffer from a wandering eye. They can be inclined to favor Hail Mary … [Read more...]
With This Plan You Can Save More in 8 Years than in 32 Without It
In October of 1999 I explained why there is only one right way to save; early and often. I wrote: Compound Interest: Your Key to Wealth Here’s an example of the power of compound interest that I hope you will pass on to your children and grandchildren. We have two hypothetical investors, Chad and Tad. Chad starts right out of his MBA program investing $1,200 a year starting at age 25 through the time he is 32-years old. He makes eight $1,200 investments. Chad then oddly becomes a monk, ending his savings days. Assume just a modest 9% annual return through age 64, just pre Chad’s 65-year … [Read more...]
Learn How Risk Reward & Time Are Related
You cannot possibly save properly for retirement without a thorough comprehension of the miracle of compound interest and the value of time. I like the materials Vanguard has prepared to introduce the risk, reward and time theory to retirement Investors. Click here to kick start your mission to retirement security. You will be glad you did. Originally posted on Young's World Money Forecast. … [Read more...]
The Antidote to Inflation Poison
In my long investment career, nothing has worked harder against my success than the negative compounding effect of inflation. Every year inflation reduces the value of the money I have worked hard to save, and impedes my progress in reaching my investment goals. In March of 2010, I explained to readers the effects of inflation I had seen in my lifetime. I wrote: Nickels & Dimes You may have had a similar experience growing up to the one I’m about to tell you. The early 1950s was a great time to be a kid, even more so for me in Cleveland Heights, Ohio, with Paul Brown and Otto Graham … [Read more...]
How the Rolling Stones Amassed a Fortune Where Others Have Failed
Last week Mick Jagger shared some video of his cardio workout routine. There he was dancing and moving to the music like only Mick can. Jagger was showing the world that, despite recent heart surgery, he is not slowing down. After years of hard touring and the excesses of the rock and roll lifestyle, Mick, Keith, and the rest of the Stones remain vital. During decades of near constant work, during which many of their contemporaries have failed, they have amassed fortunes. I described their investing process back in January of 2003. I wrote: Geezers in Wheelchairs… This year is the 40th … [Read more...]
Avalanche! It Is Astonishing How Your Money will Pile Up
There is little as satisfying as the long-term gratification felt after planning ahead, saving, and reaping the rewards of your efforts. The best way to achieve that euphoria is to harness the power of compound interest by purchasing stocks and bonds that pay you a steady stream of income. Then put that income to use by compounding it, over and over again like an avalanche. In June of 2016 I encouraged investors to harness this “avalanche of return.” I wrote: An Avalanche of Return The most important aspect of investing for the long term is—without a doubt—compound interest. The act of … [Read more...]
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