The Power of CompoundingSubmitted by Mark Smith-Windsor Investment Advisor on September 20th, 2017
"Life is like a snowball. The important thing is finding wet snow and a really long hill." – Warren Buffett
Time is the most important factor in determining your dollar value returns over your investing lifetime. Getting started early will do wonders. I have attached a chart below showing the value of an investment portfolio at age 65 with different starting ages.
|Saving 10,000 per year||Starting at Age 45||Starting at Age 35||Starting at Age 25|
|6% rate of return||$367,856||$790,581||$1,547,620|
|8% rate of return||$457,620||$1,132,832||$2,590,565|
|10% rate of return||$572,750||$1,644,940||$4,425,925|
As the chart shows you don’t need to strike it rich with the next Amazon to realize satisfactory results over a life time. I find some people get it, and others don’t. Starting early is something most everyone can do if they choose, and it matters more than your investment rate of return.
I read the Wealthy Barber when it first came out (if you haven’t read it, it’s about a barber who became wealthy through thrift). It’s kind of a hokey book, but the principles are right.
Most people operate better with some sort of forced savings - an automatic withdrawal from every paycheck, either through a work program or one you set up yourself. I’ve now been in the investment business long enough to have seen clients become millionaires through the combination of saving and returns. I’ve also noticed that income is not as big of a factor as you might think in determining net worth over time.
What to invest in can be overwhelming; there are too many choices. In the beginning my advice is to keep it simple - one or two funds is likely plenty. Once you get into individual stocks you can mix it up a bit more.
I’ve placed my daughters RESP into one of the oldest investment vehicles in Canada: Canadian General Investments. Over the past 50 years a 10,000 investment in CGI would have grown into $1.8 million assuming reinvestment of all distributions.1 That’s one big snowball.
If you would like to set up any sort of automatic investment program, call or email. It is really easy to get started.
As always I am available for any questions financial or otherwise at 306-385-6261 or by email firstname.lastname@example.org
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This information has been prepared by Mark Smith Windsor, Investment Advisor for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. The information contained in this document comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. The information contained herein may not apply to all types of investors. For more information about IAS, please consult the official website at www.iasecurities.ca. The Advisor can open accounts only in the provinces where he is registered. Mark Smith-Windsor is registered with the Investment Industry Regulatory Organization of Canada (IIROC) in Alberta, British Columbia, Manitoba, Ontario and Saskatchewan; investment advice is intended only for residents of those provinces.