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Why Invest Forever? (Part 6)

Key Points

  • Assuming a 7.2% annualized real return (including reinvested dividends), an investment will double in value about every 10 years following the rule of 72.
  • Given this rate of return, $1 can grow to $1000 after 100 years and $1 million after 200 years.
  • After enough gains in capital, incremental income can be consumed on a go-forward basis (practically indefinitely), without eroding the capital base (note: restrictions apply).

Continue reading → Why Invest Forever? (Part 6)

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Why Invest Forever? (Part 4)

Key Points

  • Although the worst-case outcomes for the investing in the S&P 500® Index seem uninviting, the index has provided reasonable returns the vast majority of the time.
  • The worst-case 5-year holding period for the index produced an annualized real return of -13.233%; however, over 80% of the time the 5-year holding period produced a positive real (inflation-adjusted) return.
  • Further, the worst-case 45-year holding period for the index produced an annualized real return of only about 3.5%; however, 90% of the time the 45-year holding period produced a solid annualized real return of close to 5% or better.

Continue reading → Why Invest Forever? (Part 4)