The Employee Benefit Research Institute (EBRI) reports that 79% of workers expect to keep working to supplement their retirement incomes. That's a plan for those who haven't saved enough to enjoy their golden years. But what happens if you can't work in retirement? At the Washington Post, Michelle Singletary explains what happens when retirees who expected to work more, simply can't. Yes, more seniors are staying in the workforce past 65 and happily so. But many others are finding themselves in a retirement quandary. They thought they had more time, but the reality is they are forced to … [Read more...]
Richard Russell’s Rule #1
Originally posted January 7th, 2016. You need to have some will-power to stick to your guns in this stock market. No one said it was going to be easy. But to allow the magic of compound interest to work for you, you have to be patient. Here is one of the great lessons I love to read over and over again from the late Richard Russell. Mr. Russell passed away in November at the age of 91. He wrote daily to his beloved subscribers right to the bitter end. I miss reading his daily thoughts on the market and, even more so, on life in general. RIP Mr. Russell. Rule 1: Compounding: One of the most … [Read more...]
Compound Interest is Key
For prudent investors, the last three years have meant watching the so-called FAANG stocks (and other speculative shares) rise at a rate that is seemingly unbounded by profits or dividends. The FAANGs have gobbled up an ever-larger portion of the S&P 500 index total market capitalization. Four of the five largest companies in the S&P 500 are now FAANGs. Today’s market environment feels similar to the late 1990s when speculation was dominant. To successfully navigate the environment then, I advised a focus on patience and compound interest. Compound Interest Is the Key Legendary … [Read more...]
Dow Down Over 1,000 Points
What great news for me and for you if you are actually an investor. I mean a real, seasoned investor. One who embraces common sense, patience and the acuity that comes with decades studying the power of consistent cash flow matched with the most powerful word in investing: compounding. My business is, as are my own portfolios, based on exactly these concepts. Market volatility has zero to do with dividends, interest (the source of cash flow), or compounding. Absolutely zero. In that I have no plans to sell my major holdings (many owned for decades), I am not concerned about short-term … [Read more...]
Pumping Gas to the Tune of $8 Million
Hard to even comprehend, but this great story, courtesy the WSJ's Anna Prior, recounts how Ronald Read accumulated an estate valued at almost $8 million. Mr. Read, who passed away at the age of 92, made a modest living pumping gas for many years at a Gulf gas station in Brattleboro, Vermont. A Five-Inch Stack of Stock Certificates How did Ronald Read manage to become a multi-millionaire? Mr. Read invested in dividend-paying blue-chip stocks. As Ms. Prior writes, Mr. Read took delivery of the actual stock certificates and "left behind a five-inch-thick stack of stock certificates in a … [Read more...]
The Most Powerful Force in Investing
The most powerful force in investing is compound interest. As Charlie Munger, Warren Buffett's long-time partner once said "Understanding the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things." The examples of compound interest that we see presented most often are those that show its power over long periods of time. Here we illustrate the power of compounding in another way. The chart below shows the gain on a $10,000 investment over a 20-year period using different rates of return. The rates of return are on the horizontal axis … [Read more...]
Turn $200 into $7 million
A client shared this story with me last week: In 1935 Grace Groner purchased three shares of company stock in Abbott Labs. 75 years later, thanks to the power of compound interest, her three share purchase was worth $7 million. Grace Groner lived nearly her entire life in Lake Forest, Illinois, about 45 minutes north of Chicago. After graduating from Lake Forest College in 1931, Grace was hired as a secretary at Abbott Laboratories, where she worked for more than four decades. Grace never earned an amazing salary as a secretary. According to the Los Angeles Times, she got her clothes … [Read more...]
The Power of Compound Interest
Making money with your money is a no-brainer. Take a look at the difference in returns between two $40 investments in Coca-Cola in 1919. One had dividends put into a piggy bank. The other had dividends reinvested. Without reinvesting, the initial $40 investment grew to $456,273 by 2012. With dividends reinvested, the value increased to $9,876,106. That's a difference of over 2060%. That's the power of compound interest. … [Read more...]
The Monday Melee: American LNG Tsunami
A New World LNG Order: Ambrose Evans-Pritchard writes for The Telegraph: The United States is poised to flood world markets with once-unthinkable quantities of liquefied natural gas as soon as this year, profoundly changing the geo-politics of global energy and posing a major threat to Russian gas dominance in Europe. "We anticipate becoming big players, and I think we'll have a big impact," said the Ernest Moniz, the US Energy Secretary. "We're going to influence the whole global LNG market." Status of LNG Terminal Approvals and Proposals: The Geopolitics of LNG: The World of … [Read more...]
Advice from My Father
When I was a kid my dad would talk to me about money. It was usually unsolicited advice. You know the kind. The advice he would give was the same advice his father had given to him when my dad was a kid. It was more of a question. “When is the best time to plant a tree?” he would ask. I had never planted a tree so I didn't know. Then he’d answer “Yesterday.” I would think, “Great I’m already behind.” Then he would ask, “When is the second best time to plant a tree?” And he’d answer, “Today.” And I would think, “But I have a baseball game.” Thinking back on his advice this morning I … [Read more...]
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