Today, I’m going to show you the No. 1 strategy for retiring wealthy.
By embracing this strategy, you’ll be on the road to riches. Ignoring it and getting lazy about using its power means you’ll never have a chance for the lifestyle you want.
But before I go on, let me warn you: You’re probably not interested in what I have to say. It’s not some gold stock that’s going to the moon. It’s not sexy. It’s not a quick fix.
The secret is not hard to grasp. You just have to understand a few simple principles. But as you might imagine, it does take some time and a little effort on your part. And you have to start taking advantage of it right now.[ad#Google Adsense 336×280-IA]It starts with one simple idea… compound returns.
If you’re not sure what compound returns are, don’t worry. It’s easy to understand and a powerful tool when you put it to work.
Simply stated, compound returns are money you make off the money you make. And the more money you make, the more money your money makes off the money your money makes. I hope you’re smiling, but here’s what happens…
Imagine you’re 40 years old, have a $10,000 investment account, and subscribe to my Retirement Millionaire letter. Over the last year, our portfolio’s conservative blend of assets has returned a fantastic 18%. If you keep reading year after year and keep making consistent 18% annual returns, what will happen to your portfolio by the time you retire at the age of 68?
You’ll have earned a million dollars.
The numbers are simple: If you start investing with $10,000 at the end of the first year, you’ll have about $11,800 (not including taxes or fees). You made $1,800 on your initial investment.
But in your second year… you’re not starting over at $10,000. The $1,800 you earned in the first year will be making money for you, too. So assuming gains of 18%, you’ll have earned another $1,800 on your original capital plus another $324 on the profits from the previous year’s $1,800.
You’re not just multiplying $1,800 times 25 years. (That only gives you $45,000.) Where does the other $903,000 come from? That’s the secret. The money starts making money on top of itself – your money is compounding.
The money you make in the first year, in this case $1,800, starts making money in the second year, third year, and so on… It continues this way for every stream of money you compound. So the $1,800 you make in your second year also makes $324 in the third.
But there’s more. The $324 you make in the second year generated by your first $1,800 now makes $58.32 on itself in the third year. Take a look at the diagram below and you’ll see how by the end of your third year, you’ll have $16,430.
And the money just keeps building. Take a look at the chart below. You can see how much money you’ll have at the end of each year. By age 68 (28 years of compounding), it totals nearly $1 million. And if you wait another couple years, until age 70, the compounding effect starts to explode. At that point, you have almost $1.5 million.
You can see why this secret is so powerful. By plowing your earnings back into your portfolio, you can get your money working for itself and amass a fortune from your initial investments.
I know it works, because both my sister and father used it to grow wealthy. But I haven’t shared the whole story with you…
Tomorrow, I’ll show you another simple step you can take to maximize the power of compounding.
Here’s to our health, wealth, and a great retirement,
— Doc Eifrig[ad#jack p.s.]
Source: Daily Wealth