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Why Investing Is Like A Children’s StoryHere is one of my favorite stories that I was told when I was a little kid… It’s a story about a man who was $100,000 in debt. He was given two options, he could simply pay the $100,000. Or, he was given a second choice. He could pay a penny the first day. Two pennies the second day. Four pennies the third. Eight pennies the fifth. And doubling the amount every day for 31 days. Of course, the man thought it would be much cheaper to take option two. After all, it was eight days before he had to pay more than a dollar! With 31 days it seemed like it couldn’t get much worse. But as it turns out, paying the initial $100,000 would have been a lot better choice. Just take a look at this chart of what the man has to pay… Day 1 $.01 As you can see, this man is kicking himself for not choosing the first option where he only had to pay $100,000. Instead, he has to pay around $21,474,800 total. So what is the point of all of this? And how does this relate to investing? I will tell you! When you invest in the long term, the story is very similar to how your money will grow in real life. Investors like to call it compound interest. But I like to call it “a ton of money coming you way if you just be smart and invest in the long term instead of being stupid and wanting everything this very second.” If you notice with the chart, the man is getting a really great deal for the first twenty days or so. I don’t know about you, but I would rather fork over $5,000 instead of $100,000. And this is exactly how long-term investing works. The first 15-20 years that you start investing, you are going to have a nice increase but nothing to brag about. You won’t be able to quit your day job just yet. But it’s the next 15-20 years where you really start seeing outrageous figures come your way. Just imagine if the man had to pay him for 40 days instead of 31. He would be paying over a billion dollars a day! It’s going to be scary how much money you are going to make if you start investing right now and keep it working for you in the long-haul. If you want the best possible way to become a millionaire, here is your chance. All you have to do is consistently invest, and do it for a long time and you will eventually become a millionaire. How do you like the sound of that? I don’t know about you, but I would love to have an extra $1-3 million dollars socked away for retirement. Silly Chart #2 - Only This Time It’s Your MoneyHere is another chart for you to look at. This is what you can expect if you put away $5000 a year. This assumes you receive an annual return of 9% which is extremely likely if you invest in an index fund that reflects the entire growth of the stock market.
Notice in this chart how the earnings section increases every year. This is compound interest going to work for you. It starts at only a few thousand dollars after the first few years but eventually shoots up to over $100,000 a year. Just from having your money sit in your account! Please keep in mind that a million dollars forty years from now won’t be as valuable as what a million dollars is today. Kind of like how a million dollars today isn’t as much as what it used to be. Remember, gas used to be $1 per gallon and a cheeseburger used to be a quarter. But nevertheless, having a million dollars forty years from now is much better than not having a million dollars forty years from now! It will still be a pretty good chunk of change. And it can easily be yours if you start doing some smart investing today. Related Investing Articles Why Lifecycle Funds Are Your Best Investing Strategy7 Emotional Traps In Investing, And How To Avoid Them The One Key Thing You Don't Know About The 401K Plan Why Investing Is Like A Children's Story I Will Teach You To Be Rich In 10 Minutes Couple Loses One Million Dollars Drinking Their Favorite Coffee Why Your Company 401k Plan May Be A Bad Idea Like what you read? You can receive updated and exclusive information about the site in my Ultimate Personal Development Newsletter. It's free to join and you can unsubscribe at any time... Return to Your Guide To Smart Investing Return from Why Investing Is Like A Children's Story to Ryan Whiteside: Your Ultimate Guide To Personal Development home |
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