At the start, let me emphasize........
I'm NO financial planner.
(And no, I don't play one on TV either.)
There are probably several folks reading this post that know a boatload more than I do about investing.
I know just enough, maybe, to be dangerous.
But for some reason, my meager knowledge has sort of made me the "go to" guy
at my company when co-workers have questions about their retirement plans.
I titled this post "Investing 100", because what I'm about to convey is "bonehead" information, intended to incite some of you "foot draggers"
to do some homework yourself, and then ACT on it!
Ole Prairie Dog and I were learning to fly helicopters in Savannah, GA..
(Horrible duty, by the way.)
At the end of each flying day we'd come back to the company area to find a kindly looking retired Lt. Colonel loitering around,
chatting with our classmates.
He sold Mutual Funds from a Fund Family called "Keystone"
We were all facing a year of flying in Viet Nam,
and all I wanted to do with my money was have a good time.
Investing was pretty low on my priority list.
But he tweaked my curiosity.......
what the heck was a Mutual Fund?
How did they work?
I did some research and bought my first shares of a Mutual Fund in 1970.
I was a licensed broker and sold Mutual Funds from 1974 to '76.
When our "Big Bubba" turned 20,
I challenged him to get started investing.
With my guidance, (and his money), he put $2,000 in a
Roth IRA using Vanguard's "S&P 500 Index Fund".
(I like the Vanguard Family because of their low fees.)
He has continued to invest $2,000 per year in that Fund.
If he continues to invest at that rate,
and the stock market continues to perform as it has historically,
he'll be able to retire when he is still a VERY young man.
I'm proud of him for having the
discipline I didn't have at his age.
Let me share two interesting investing stories:
Identical twins, Uno and Dos, celebrate their 20th birthday.
Uno starts a Roth IRA.
He puts $2,000 a year in a Mutual Fund that has historically grown 8% annually.
Brother Dos says, "Nah, I want to buy a new Harley,
and next year I want a new bass boat.
I'm young, and there's plenty of time to invest later."
Uno continues to squirrel away $2,000 per year for 10 years.
At that point, Uno STOPS putting money in his IRA.
Now, at age 30, Brother Dos decides
it's time to get serious about investing.
He opens an IRA account with the same Fund as his twin.
Assuming he continues adding $2,000 per year, and the Fund continues to earn 8% annually,
at what point will his account value exceed that of his brother's?
My second illustration, similar to the first, will help answer that question.......
Find a Fund or other investment that averages 8% per year interest.
Add $50 a month to that Fund for 10 years.
At that point, stop your monthly deposit,
and start withdrawing $50 per month.
At what point will the Fund be totally depleted?
The answer to both questions?
In the first example, Uno's investment is earning considerably more than $2,000 per year when Dos begins to add $2,000 per year to his new IRA.
Dos can add 2-Grand a year for infinity, and he will NEVER catch up!
In the second illustration, after 10 years the Fund will be earning,
by my quick calculations, $87.63 per month in interest,
so withdrawing $50 a month will allow the principal in the Fund to continue
to grow at a pretty healthy rate.
Historical returns for the overall Stock Market
are above 8% per year.
Do your homework.
Find an investment you can be comfortable with.
Get started now!
(If you have access to a company 403(b), 401(k), or 457,
it makes NO SENSE to not AT LEAST contribute to those accounts at the minimum contribution necessary to take advantage of company matching funds........a 100% per year return on that money!!!)
And as both my illustrations show, time is critical.......
sooner is MUCH better than later!
If all this is still confusing, let me recommend the book:
"The Wealthy Barber" by David Chilton.
It's a quick, easy, enjoyable read,
and will answer most of your investing questions.
(I wish someone had shared this with me when I was 20!)
Update: 23 October
Wow, this got out of hand in a flash!
Read the comments.
My intent was to provide some VERY basic investing examples and prod some slackers into doing a little study on their own before setting cautiously off on a journey to improve their lives.
I started the post with the "I'm no expert" disclaimer.
Notice also the investment I have started my son in: An S&P 500 Fund that does virtually no stirring, and therefore has extremely low fees.
For that reason, most all of Big Bubba's money stays at work.
That's the path I will continue to take until I see a better way.
Infgtr has extraordinary credentials.
What I glean from his comments is that if you aren't gonna retire shortly,
you'd better be looking for ways to hide your money, and invest it in more complicated vehicles than I recommended.
If that is true, I'm more out of touch than I could have imagined.
I'm fearful of a scenario where you have to be an attorney to be sure you have efficiently hidden your money from Big Brother and other meanies.
Has it really come to that?