By Vic Lederman $2,074,904.21... That's how much money a 68-year-old would have today if they had invested $10,000 in the S&P 500 Index when they were still 18 years old. It's an average annual return of nearly 11.3%. But it's only possible if they had reinvested all the dividends paid throughout all those years... and not spent a single penny of their gains. That's a lot of patience to practice over 50 years. As we get older, we (hopefully) learn to be more patient. The only problem is most older folks don't have 50 years to invest to see these kinds of returns materialize. It takes a special kind of individual to learn to start investing at a young age and stay the course for 50 years without wavering. That's just not the way most folks are programmed... We tend to be aggressive risk-takers when we're younger. After all, it's hard to wait for that distant payday. As we get older, we tend to become more risk-averse. And we usually don't mind waiting for the guarantee of stable returns. That's why investors constantly seek outperformance. It's the only way to see those kinds of gains within a time frame that doesn't involve already being unable to enjoy life (or worse) by the time they cash out. For instance, if you could find an investment that had a consistent average return just 3% higher than the S&P 500, you could cut down the waiting time by 10 years. You would have nearly $2.1 million by the age of 58 instead of 68. To bring that waiting time down by another 10 years, the investment must return an average 19.5% a year for three decades. Now, investing for 30 years sounds doable. Start young, and you'll be barely 50 years old when that final big paycheck arrives. But finding an investment that generates 19.5% annually for three decades is no small feat. If fact, it's nearly impossible to do so without a little bit of both patience and time that I mentioned above. As the late Charlie Munger – the legendary Warren Buffett's longtime business partner and friend – famously said... Investing is where you find a few great companies and then sit on your ass. It's not that investing in the S&P 500 Index is wrong. It's still one of the most profitable trades out there. But if you want to live a comfortable life with the help of the stock market, you're going to have to find great companies that have the potential to deliver those kinds of outperforming gains. Good investing, Vic Lederman
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9 Comments
MissG @let_it_ride · 2yr
Great read 👍🏼 I plan to go through all your posts one day! So much valuable information you are sharing with this community 🙌🏼
Beskar Capital@beskar_capital · 2yr
No, Ryan. 😂
Osmel @osmel86 · 1yr
Excellent reading bros 🙌🏾
Nika @themiddleagedinvestor · 1yr
What would Vic say to someone who at 58 who started investing? ;)
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