Random Thoughts, 7-27-05

[greybeta]

flcodemonkey, I hope you return in the future.
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Baseball news wise, Mark Cuban might buy my Pirates. Maybe then we could hang onto our young talent.

Oh, and those A's are scorching hot. They just might win the AL West with the resurgence of their pitching (maybe Billy Beane knows what he's doing even if he traded away Byrnes). So are the Astros.

Derrek Lee will win the Triple Crown.
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Recently watched the anime Air. Very nice, good story and characters, though I had to watch it twice to pick up everything.

I'd also recommend seeing Howl's Moving Castle, based on the novel by Diana Wynne Jones, currently showing at theaters nationwide. It's beautifully animated by Miyazaki, though the ending hurt my head a bit.
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Strangely enough, being twenty one feels no different from being twenty. Except that I can legally gamble and buy alcohol. Which still isn't a big difference.
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If there's one thing that you would like to tell yourself when you were (or will be) twenty one years old, what would you tell yourself?

Comments

[greybeta.livejournal.com]

Investing...now that's something I haven't thought about.

[visgoth.livejournal.com]

You've probably seen a variant on this before, but just in case, I'll go over it...

The stock market, on average, returns about 11% a year, so we'll use 11% as a rate of return. If you invest in an S&P 500 Index fund, this is about the return you can expect over time. Some years will be better, some will be worse, and the longer you're in, the closer to 11% you will probably get.

I'll use $1,000 deposited each year as the contribution toward principle.

Also, to keep things simple, we'll compound the interest once a year on the full contribution. As I'm sure you can figure, the number shift when you break the contributions and the interest calculations up over the year, but everything works in essentially the same way.

Start investing $1,000 a year at 11% when you turn 21. Make your last contribution when you turn 30. Withdraw the money at age 65 after the interest compounds. You will have over $716,000.00 (before taxes).

Alternately, start investing $1,000 a year at 11% when you turn 31. Make your last contribution when you turn 65, and withdraw it after the interest compounds. You will have under $380,000.00 (before taxes).

So... Invest $10,000 when you are young and earn $706,000.00 on it, or wait a few years, invest $35,000 and earn $345,000.00 on it.

Like I said, these numbers are somewhat idealized and simplified, but how compound interest works doesn't change just because you change the numbers or how often interest is compounded. You best advantage is still time. I encourage you to use it.