Quite right... The more I have put away the less I want to spend. I used to crave the latest iPhone or whatever. Now I know I can go and buy anything like that tomorrow with no consequence, I don't want to do it. It's more than enough to know that I can buy it if I want to but choose not to. That is quite liberating.
When my daughter was a baby we had a next door neighbor, Jack, who was in his 70’s and was a multimillionaire. He lived in the same nice, but smallish home he had owned for years, and had worked his entire life in a very ordinary job that didn’t require a college education, which he didn’t have. He had become a multimillionaire by putting $10 a week away when he got his first job after finishing his military service at 19. And he never varied that process. Every week, like clockwork, $10. The miracle of compounding.
My Uncle used to always say that the first million was the hardest. When I was young, that number was demoralizing. I like the 100k number that you’re using better. Solid facts here - great video.
So a 1m will makes 80k a year so this means you can have 80k income a year and your 1m never goes down!!! But they keep telling us about 4% rule which of course it is just wrong and nonsense
If you take 8% income you can but over 20 years the value of your million will have been beaten away by inflation, so you take 4% and reinvest 4% to keep the million growing.
@@BoninBrighton You don't need to grow your 1m after you retire you need to spend! Also inflation shouldn't be running at 4% but most likely to be around 2.5% going forward.
Here’s the thing. If I have $100K invested in stocks only (ETF or fund or my own pics or whatever) - and I wait a year - then after that year, let’s say the fund goes up to 108K as you say. I don’t realize that 8K gain unless I sell. So, when you talk about “compounding” as it relates to stocks - I disagree. Because in the next year, that 108K could go down to say 99K. What is my advantage of “starting off” year 2 with 108k? Nothing. Now for individual Bonds, it’s different. I can take that 100K and get a bond at 5% and at the end of the year, I get 105K. Then I can invest that bond at another 5% and get 110.25K and so on - I can actually SEE the compounding happening. I really think it’s weird that the growth of equity is referred to as “compounding”. What are your thoughts on this?
Growth of equity is not linear. The returns are more lumpy. You could see no growth or negative growth for a whole year and then in the following year you could see in the space of 2 or 3 months a 25% return bringing growth back to the mean growth rate. The S&P 500 is a classic example where this happens. It’s something like 10 trading days in a year that produces returns. Hence the saying time in the market beats timing the market. Equity’s over the long term beats bonds.
Please note that my real issue is calling equity growth "compounding". I understand that it is a lumpy road to gains, but that is the exact reason why I find it weird that it is called compounding (when talking about equity growth).
Quite right... The more I have put away the less I want to spend. I used to crave the latest iPhone or whatever. Now I know I can go and buy anything like that tomorrow with no consequence, I don't want to do it. It's more than enough to know that I can buy it if I want to but choose not to. That is quite liberating.
It's a wonderful feeling too eh. Thanks for getting involved.
When my daughter was a baby we had a next door neighbor, Jack, who was in his 70’s and was a multimillionaire. He lived in the same nice, but smallish home he had owned for years, and had worked his entire life in a very ordinary job that didn’t require a college education, which he didn’t have. He had become a multimillionaire by putting $10 a week away when he got his first job after finishing his military service at 19. And he never varied that process. Every week, like clockwork, $10. The miracle of compounding.
That's brilliant Dorothy.
Thankyou great video 🎉
Always enjoy your content.........great stuff
My Uncle used to always say that the first million was the hardest. When I was young, that number was demoralizing. I like the 100k number that you’re using better. Solid facts here - great video.
Thanks for your insight as ever. Appreciate it.
Love this shorter format video 👌 rule of 72 is useful knowledge 👍
Thanks for explaining the rule of 72. I just told my husband about it.
Glad it was helpful!
So a 1m will makes 80k a year so this means you can have 80k income a year and your 1m never goes down!!! But they keep telling us about 4% rule which of course it is just wrong and nonsense
If you take 8% income you can but over 20 years the value of your million will have been beaten away by inflation, so you take 4% and reinvest 4% to keep the million growing.
@@BoninBrighton You don't need to grow your 1m after you retire you need to spend! Also inflation shouldn't be running at 4% but most likely to be around 2.5% going forward.
Here’s the thing. If I have $100K invested in stocks only (ETF or fund or my own pics or whatever) - and I wait a year - then after that year, let’s say the fund goes up to 108K as you say. I don’t realize that 8K gain unless I sell. So, when you talk about “compounding” as it relates to stocks - I disagree. Because in the next year, that 108K could go down to say 99K. What is my advantage of “starting off” year 2 with 108k? Nothing. Now for individual Bonds, it’s different. I can take that 100K and get a bond at 5% and at the end of the year, I get 105K. Then I can invest that bond at another 5% and get 110.25K and so on - I can actually SEE the compounding happening. I really think it’s weird that the growth of equity is referred to as “compounding”. What are your thoughts on this?
Growth of equity is not linear. The returns are more lumpy. You could see no growth or negative growth for a whole year and then in the following year you could see in the space of 2 or 3 months a 25% return bringing growth back to the mean growth rate. The S&P 500 is a classic example where this happens. It’s something like 10 trading days in a year that produces returns. Hence the saying time in the market beats timing the market.
Equity’s over the long term beats bonds.
5% bond returns are negative when you take inflation and monetary debasement into account.
Bonds also fall in price. Money market funds don’t keep up with inflation neither does cash. Choose your poison.
Please note that my real issue is calling equity growth "compounding". I understand that it is a lumpy road to gains, but that is the exact reason why I find it weird that it is called compounding (when talking about equity growth).
You take 8% in dividends NOT by selling the shares though….but far better to reinvest 4% and only take 4% as income.