Comments on: The Power of Compounding http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/ Personal finance blog for college students, recent graduates and everyone else -- including entrepreneurship -- for getting rich. Featured in the Wall Street Journal and New York Times. Sun, 21 Mar 2010 02:45:13 -0700 http://wordpress.org/?v=abc hourly 1 By: Moneybagzz http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-62695 Moneybagzz Mon, 26 May 2008 04:07:47 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-62695 The presentation illustrates a point but it commits what I call "The Fallacy of a Straight Line Assumption." Specifically, equity and bond returns are rarely (looking forward) going to be a straight 8% (or any other amount). It is dangerous to presume that future returns will be like past returns. In hindsight fluctuations over time may be roughly equivalent to one particular rate; but you can't depend on that as a steep drop in asset values can severely reduce your returns. I have a preference for 'opportunistic allocation.' I prefer to buy shares on days when the market is in the tank, rather than on a fixed day of every month. Should I choose to sell, I do so gradually (and hopefully in a general uptrend). I would bet that a person who makes purchases on days that the market stumbles would outperform a person who dollar-cost-averages (but I have no data to back that up). The presentation illustrates a point but it commits what I call “The Fallacy of a Straight Line Assumption.”
Specifically, equity and bond returns are rarely (looking forward) going to be a straight 8% (or any other amount). It is dangerous to presume that future returns will be like past returns.
In hindsight fluctuations over time may be roughly equivalent to one particular rate; but you can’t depend on that as a steep drop in asset values can severely reduce your returns.
I have a preference for ‘opportunistic allocation.’ I prefer to buy shares on days when the market is in the tank, rather than on a fixed day of every month. Should I choose to sell, I do so gradually (and hopefully in a general uptrend).
I would bet that a person who makes purchases on days that the market stumbles would outperform a person who dollar-cost-averages (but I have no data to back that up).

]]> By: Barbara Saunders http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-62492 Barbara Saunders Fri, 23 May 2008 05:04:11 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-62492 I agree for the most part, but my financial advisor makes another good point. The key is not "start early", it's "start now." If you are early, lucky you. If you are not early, there's nothing you can do about it and are wasting your time crying over spilled milk. So, start now! I agree for the most part, but my financial advisor makes another good point. The key is not “start early”, it’s “start now.” If you are early, lucky you. If you are not early, there’s nothing you can do about it and are wasting your time crying over spilled milk. So, start now!

]]> By: Denny http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-62488 Denny Fri, 23 May 2008 04:12:37 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-62488 Well, it never said anything about putting in a savings account, it says "investing". And many investment instruments can earn 8% p.a. easily. Well, it never said anything about putting in a savings account, it says “investing”. And many investment instruments can earn 8% p.a. easily.

]]> By: Dexter Stinson http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-53627 Dexter Stinson Tue, 26 Feb 2008 03:12:05 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-53627 Hello Everyone I believe strongly in compound interest savings account. I'm haveing trouble finding a compound savings account that will give a 10% rate of return. Please e-mail with help. Thanks Dexter Hello Everyone

I believe strongly in compound interest savings account. I’m haveing trouble finding a compound savings account that will give a 10% rate of return. Please e-mail with help. Thanks Dexter

]]> By: Brandi Jo Newman http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-53079 Brandi Jo Newman Mon, 18 Feb 2008 22:27:18 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-53079 What about the taxes you need to pay? When you have compound interest you also have compound taxes? Don't people usually earn more in their later years and pay more taxes? AND, when you continue to add money to the compounding pile, you are also adding to your tax liability. If there is a tangible need for an interest bearing vehicle, take the growth off the top and do something else with it - pay off debt, life insurance, more cash flow. What about the taxes you need to pay? When you have compound interest you also have compound taxes? Don’t people usually earn more in their later years and pay more taxes? AND, when you continue to add money to the compounding pile, you are also adding to your tax liability. If there is a tangible need for an interest bearing vehicle, take the growth off the top and do something else with it – pay off debt, life insurance, more cash flow.

]]> By: AHFXStudios http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-125 AHFXStudios Sat, 03 Feb 2007 22:48:10 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-125 The whole trick is that you have to get that 8% interest rate. If you only get 6.25% then Dave makes more (although he did have to put 40,000 more into the account to do it. The bad thing is that most people starting out don't put their money in higher yield accounts, they just put it in a savings account and are not much better off than if they had hid it under their mattress. The whole trick is that you have to get that 8% interest rate.

If you only get 6.25% then Dave makes more (although he did have to put 40,000 more into the account to do it.

The bad thing is that most people starting out don’t put their money in higher yield accounts, they just put it in a savings account and are not much better off than if they had hid it under their mattress.

]]> By: Edwin http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-124 Edwin Sun, 31 Dec 2006 21:26:11 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-124 Wow, great graph, Its pretty incredible, but true. Wow, great graph, Its pretty incredible, but true.

]]> By: Jonathan http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding/comment-page-1/#comment-123 Jonathan Tue, 28 Nov 2006 21:13:04 +0000 http://www.iwillteachyoutoberich.com/blog/the-power-of-compounding#comment-123 Amen. Amen.

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