Lifestyle > Train of Thought
The power of Compound Interest, the stock market, and your 401K plan
J @ M @ L:
Investing is the best thing you can do with your money... no doubt about it. Like you said... some people don't know about finance... but another problem is that a lot of people don't even have the money to invest. Take all those people working for minimum wage (or a little above)... supporting families... after they pay off their rent/mortgage, put food on the table, and pay for other necessary living expenses.... they don't have jack-shit left over.
Trauma-san:
Yup. I would say to that, working for minimum wage the rest of your life is not a very good game plan.
Don Rizzle: The stock market itself has averaged over 11 percent since inception. Carefully chosen mutual funds can easily offer 11% returns, in fact most of the big players have almost perfected strategies to earn nearly 15% returns with minimal risk.
you're right about the stock market being risky, but like any mathematical equation there are standard deviations in return rates and you can estimate and calculate, and compensate for all that. The #1 thing that takes the risk out of the stock market is time. this guy is investing for 65 years, so it's an extreme example.
Ant:
Time does not take all risk out of the stock market, and like you pointed out this is an extreme example that no one on this site will be able to take advantage of.
We all have at best 30-40 years before retirement - not 65. But the stock market will not garantee you an 11% return over time. For a 30 yr period the market will garantee you with 95% certainty an inflation adjusted return between 2.6% and 10.6%.
TraceOneInfinite:
Interesting thread... I can't do anything you suggested because interest/usury is a sin in Islam... but still this was all an interesting read.
nibs:
135k a year really isn't alot of money. nothing you'd want to live off if you had a family. as a bachelor you could ball out.
seriously, the kid gets 10 million at 65? that ain't shit. really isn't shit. 65 is fucking dead. who seriously cares about how much $$$ 65 year olds have. what that tells you is that it takes 4 or 5 generations for compound interest and investing to turn a small sum of money into they type of wealth that can support a family in order to live richly. it's the grandson's kids that can benefit from that money in any interesting way, and again, 135k/yr is decent for a bachelor, or a young couple with no kids. you throw kids in the mix and you're trying to budget that paltry sum
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