Compounding

The real power of investing is compounding.

Let me show you how it works.

The 10-year total return on the S&P 500 was 12.06% per annum. This means that for every $1 invested 10 years ago, you now have $3.12. Your money has tripled.

The 10-year total return on the Nasdaq 100 was 17.6% per annum. This means that for every $1 invested 10 years ago, you now have $5.07. Your money has quintipled.

Here’s an example of my own, I invested in a fund about 9 years ago. It’s a contrarian global fund. During that time, there were issues - politics, Covid, Ukraine, inflation, etc. My return after fees was 12.5% per annum. The capital has more than tripled.

I beat the S&P 500 by doing nothing, except making the initial investment.

Investing on easy street

You don’t have to be a financial person to become wealthy through investing. Do it the easy way.

1. Sign up with an investment company. A reputable investment company!

2. Choose a fund. You can start with the S&P 500 or Nasdaq 100 or a global fund if you’re not sure. Pick all three if you want. Or go with the fund you like. Mixing it up is not a bad idea.

3. Every month let them take the same amount from your account and invest it.

4. Don’t worry about the market going up or down. Just invest.

5. Review your statements. Once per quarter review the statements that they send you, so you know what is going on. If you are the worrying type, then review it once in six months. Don’t ignore it - money also needs a little TLC.

6. Add more when you can. If you get a bonus or have some excess cash, make a one-off contribution.

7. Increase annually. As you get salary increases, add more to your funds.

8. Have fun while getting rich.

Financial markets and products are complicated, so if you have a financial advisor, get advice from them. If you don’t have a financial advisor, find one and pay a consulting fee for advice.

The sooner you start, the sooner you will create wealth.

Wishing you all the best for 2024

In 2024, I’m going to be sharing some nitty gritty business and investment stuff with you. It’s the kind of stuff I learned and used in my career to get ahead, but I wish I had learned it in my MBA at Business School.

If you enjoyed the newsletter this year, forward this to your friends so they can join as well. They can subscribe by clicking here. The newsletter is absolutely free and everyone is welcome.

(Wait a second… I just realised the newsletter costs me big $$$ to run… Guess I’ll have to up the portfolio’s performance in 2024 😀)

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