Investment Resources

A Brief Reminder on Saving and Investing

Before I show you how to simply and effectively manage that goal, let’s remind ourselves why we want to achieve it in the first place. The reason is pretty basic: compound interest.

The compounding effects of long-term investing are pretty dumbfounding. The average return on the S&P 500 since 1926 is nearly 10%. If we shorten this time period and take, say, 1950 as a starting point which is only 69 years ago, we get these results:

S&P 500 – 90 Year Historical Price Return (Non-Inflation Adjusted)

Investment Resources Frugal Investors

For a single dollar invested in 1950, the S&P 500 index has gone from 19.52 in October 1950, to 2986 as of today. Not including dividends (positive) and the impact of inflation (negative) that’s a 145-fold return in 67 years.

That being said, we have to account for the negative impact of inflation. Now if you didn’t touch the dividend income and you re-invested it in more shares, then your $1 would be worth $55 today in real terms. That’s a phenomenal return. If in theory today was October 1950 and I was writing this as a newspaper article, then my £1 million investments, left to batter on for 69 years with the same level of performance, would be worth £52 million in today’s money by that time in the future. However if you spent the income and interest each year, then $1 invested in 1950 would be worth approximately $15 in real spending power once you’ve accounted for inflation.

The lesson? Invest your money early, and re-invest income and dividends, over a long period of time to become truly wealthy.

Browse below for blog posts and articles that can get you on track to achieve your financial goals and invest money for the long term.

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