Imagine investing an inflation adjusted $1k a year for 40 years…. And growing it to $1.9 million?
THIS is the power of investing.
The government’s direct payments are already hitting Americans’ bank accounts and, if you’re fortunate enough not to need the money immediately to pay your bills…then,
my advice is to invest.
Of course, my advice is always to invest. And save. And prepare.
There are various ways to do this — and it’s critical you pay down your debts and keep a little cash on-hand for a rainy day fund… but, remember, you don’t want to be left out of the opportunity to be part of the great capitalist engine that is America. Over time, it’s extremely difficult to beat the markets.
You need to invest. Just a little each week. By getting into the markets regularly, you’ll help protect yourself against mass swings. It’s known as “dollar cost averaging.”
And, the numbers are hard to argue with. Even with all the twists and turns, if you have a multi-decade time horizon, you will quite benefit from the rising tide that is the American economy.
A journalist at MarketWatch recently wrote a thoughtful analysis that examined what would happen if an investor had been putting into the market, an inflation-adjusted equivalent of $1k per year.
The data looked at putting an inflation-adjusted $1000 per year into the S&P 500 index, starting in 1970.
By 2020–after 30 years–do you know your account would have grown to $689,226? By 40 years, it would be worth just $649,360 (thanks to a couple bear markets. Ouch!)
Nonetheless, IF you stayed the course…AND you stayed invested…you’d have accumulated $1,352,002 by the end of 2014. By 2017, nearly $1.9 million.
Yet – you know how much in total you would have put in?
$105k into almost $2 million.
And, you wonder why I say invest?
The key is to be able to stay in a well diversified portfolio for the long hall. Because time helps iron out your risks.
As I’ve said before, I anticipate some inflationary effects as a result of the stimulus. Inflation COULD come via higher prices and we’ve already seen some evidence of that…meanwhile, it will likely result in certain inflationary pressures on assets. Including the stock market.
So, again, you want to be invested.
Some things to look at:
LOW-COST MARKET INDEX FUNDS: I like index funds because they help diversify your investment. I realize some folks in the Reddit community and on Robinhood may want to put all their money on one stock, but I’m a traditionalist. S&P Index funds, or a Nasdaq or Dow index fund is a good way to go.
As for other ideas?
TECH: A lot of tech has been beaten down recently so, it’s worth finding some good names (preferably undervalued) in that sector.
GOLD: Gold is a great hedge against inflation and should be part of any diversified portfolio. Remember, gold has been a store of value for thousands of years and though bitcoin is seemingly unstoppable these days, gold is a commodity that has stood the test of time. We have an excellent primer on Trish Intel with some ideas for gold investors.
OIL: Oil is another commodity to watch. Though there’s tremendous pressure to wean ourselves off of fossil fuels, I suspect the world will continue to need oil in some way. With so much pressure on the industry from the ESG community, oil could quite easily become less available and therefore, more valuable. Moreover, as people increasingly get back to traveling (and taking long distance trips on planes) oil will still see demand. WTI Crude is trading at $65.93 a barrel, while Brent Crude currently trades at $69.49.
DIVIDEND STOCKS: It’s a back to basics with good old fashion dividend stocks. Though I have my concerns about the country and its political-economic direction, I’m still confident that the American people will get this right. It’s the biggest reason why I’d never bet against this great nation — and its great companies.
The reality is: you need to be diversified. And, you need to be invested. It will always be bumpy…bear markets happen. But, if you’re a smart investor who believes in America, you will see those bear markets as your opportunity to buy low.
$25 A Week Into the Markets
So, do yourself a favor. Put a little money – even if it’s just $25 a week – into the markets. Find a low cost (ideally zero cost) brokerage house, and get started.
Remember: Being a long term investor is truly one of the best ways to help yourself, your family, and American business.