It has now been 19 years since we started Young Research’s Retirement Compounders Program. Our overriding goal in developing the RCs was to help investors like you achieve investment success with comfort and confidence.
Compounding is the key to long-term investment success. And to reap the profound rewards of compounding, you need time—the more time, the better.
Consider the hypothetical example of an investor who earns 8% on a $100,000 investment. After ten years of compounding at 8%, $100,000 becomes $216,000. After 20 years, $100,000 becomes $466,000. That’s more than four times the initial investment. After 30 years of compounding at 8%, a $100,000 investment becomes over $1,000,000! That’s more than 10X the initial investment.
Our Approach
For the RCs to help investors achieve long-term investment success, the program had to have a risk profile low enough to keep them comfortable and invested even during market downturns. Selling during a bear market and buying after the coast looks clear is a strategy that is certain to sabotage the benefits of compounding.
Imagine if you sold at the market low in March of 2020 when a COVID depression looked imminent and waited to reinvest until the end of November 2020. Pfizer had announced the vaccine that month, so things were finally looking up. If you pursued that strategy assuming a start date of January 1st, 2020, you would still be down about 15% today, despite the stock market being up almost 40% since then.
Such a scenario may sound hypothetical to you, but it isn’t. Dalbar, a market research firm, does studies on the performance of individual investors versus the market. The studies regularly show individuals underperforming the market by 3-4% annually. Poorly timed buy and sell decisions are to blame.
How does the RCs program help investors stay the course during market downturns?
The RCs program invests only in companies that pay dividends. The RCs selection process also favors high-quality businesses with long records of making consistent dividend payments and preferably long records of making regular dividend increases. Companies that pay dividends and increase their dividends over time are often more stable businesses than non-payers, and they tend to fall less in down markets than non-payers. Our approach also favors companies with strong balance sheets and those with high barriers to entry. So even if share prices are down, investors can be confident that first, bankruptcy is likely not on the table, and second, the business will recover when the economy and markets recover.
We can promise that we will continue to manage Young Research’s RCs program with the same dividend-focused, low-risk strategy we have pursued since the program’s inception.
