Monday, December 11, 2006

UNCOMMON CENTS 36

ALBERT EINSTEIN SAID THE GREATEST DISCOVERY OF THE 20TH CENTURY WAS ....COMPOUND INTEREST. ALONG WITH SEX, IT IS A LEGAL AND ULTIMATE PLEASURE THAT YOUNG ADULTS CAN ANTICIPATE AND ENJOY. YET HOW MUCH INTEREST HAS BEEN PAID BY TO THIS WONDROUS PHENOMENON? NO ENOUGH, AT HOME OR IN THE SCHOOLS. HAVING SAVED $3000, A YOUNG, WORKER SHOULD PLUNK THIS NEST EGG INTO AN U.S. TOTAL STOCK INDEX FUND. A VANGUARD FUND IS A POSSIBILITY. THEN BY REGULARLY ADDING $100 A MONTH TO THIS FUND AND RE-INVESTING THE DIVIDENDS AND CAPITAL GAINS (PROFIT FOR THE YEAR), THE INVESTMENT WILL COMPOUNDS ITSELF OVER TIME. IN 20 YEARS AT SAY 5% YOU WILL HAVE EARNED A PROFIT OF $17,103. IMAGINE WHAT ACCRUED IN YOUR CAPITAL? PATIENCE AND NEGLIGENCE WILL PAY OFF IF THIS ACCOUNT IS LEFT TO WORK FOR ITSELF OVER A 20 YEAR SPAN. IN SOME YEARS, A 5% PROFIT MAY NOT BE ATTAINED. PERHAPS YOU WILL SUFFER A LOSS IN THE INVESTMENT. BUT IN OTHER YEARS, THE NUMBERS WILL SHOW A PROFIT. THE SECRET IS TO RE-INVEST ANY PROFITS EACH YEAR. AN INDEX FUND COVERING THE TOTAL U.S. STOCK MARKET IS THE SIMPLEST WAY TO START, BUT AS TIME GOES BY AND ADDITIONAL MONEY IS AVAILABLE YOU MIGHT WANT TO BALANCE YOUR FIRST PORTFOLIO OR ADD ANOTHER PORTFOLIO WITH A 60% U.S. STOCK, 20% INTERNATIONAL STOCK AND A 20% BOND BALANCE IN AN INDEX FUND. K.I.S.S.

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