The magic of compound interest!  

redmustang91 57M  
8703 posts
5/27/2006 11:40 am
The magic of compound interest!


The Roth IRA is such a good deal everyone should start one for their kids. Can you imagine turning $1000 into $1 Million in 45 years and taking distributions tax free! Or leaving it to the next generation! so amazing and so doable with some planning and a little luck. Don't waste another moment! Invest and get rich!

Retire comfortably: $1 million in 45 years
We know that our recommendations are averaging impressive returns. But let's not get greedy, and let's not extrapolate for decades into the future what has been a start beyond even the most optimistic expectations. What if we dial back our expectations and assume a still very aggressive annualized 16.6% return on our initial investment? In that case, $1,000 would take 54 months to double. And under that scenario, it would take approximately 540 months for $1,000 to double 10 times to reach $1 million -- or 45 years. That should work out just about right for any Fools out there who have just graduated from college, have $1,000 to invest right now, and who'd like a chance at retiring comfortably on the proceeds around about age 65.

Set your grandkids up for life: $1 million in 75 years Now for scenario No. 2. There are plenty of market skeptics out there, declaiming to all who will listen that the United States is entering a long-term secular bear market. The Oracle of Omaha says that we should be prepared to see overall stock market returns in the mid-single digits for the foreseeable future.

Ah, but we're not investing in index mutual funds, folks. We're busily earning our keep by helping our members buy just the good companies out there in the market -- rather than buying an index that incorporates the returns of a grab bag of companies, be they good investments, bad investments, or Enron common stock. In the worst-case scenario, we're pretty confident that over the long term, we can match or beat the market's historical performance through hard work, diligent research, and patient perseverance. With the broad stock market averaging slightly more than 10% annual returns across extended periods of time, that should assure us a reasonable chance of at least doubling our $1,000 within 7.5 years. Total time to $1 million: 75 years. Fools don't invest $1,000 in one shot and then sit back and wait for the money to roll in -- whether that money is going to be 75, 45, or just 30 years in coming. We continue to save. We keep investing. Regularly. Meaning that, even at the market average, you could accumulate $1 million a lot sooner.

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