In a recent blog I discussed some strategies that I found while reading Smart Women Finish rich, by David Bach:
Bach uses an example of a 14 year old girl who invests 2,000 every year for 5 years. She places her investment in a 10% interest account and does no more saving after this but leaves it in this high interest account until she retires at 65. At which point this initial 10,000 investment is worth over 1 million.
There are of course a few flaws in this plan. My first question is how on earth can you guarantee 10% any where? The answer is of course that you can’t. But hey it might be worth trying. Google this question and there are many ideas out there, none guaranteed of course, but the lesson that I am starting to realise is nothing ventured and all that.
My other problem with this kind of investment is that she started at 14…I wish! But this is the point that Bach makes later: it is the cumulative effect that is so important. He also shows how much we should be saving and at what age to achieve the same figure (although still with that almighty 10% interest rate).
I have looked at a few ways to achieve that 10% and have been sniffing around, If you read Bach’s book , this is about creating some financial security before you start playing with money. But nevertheless his message is clear. Do something and do it today.
Albert Einstein said, “A man should look for what is, and not for what he thinks should be.” Price is the only thing that tells you the direction of the market, or “what is.” Everything else is opinions about “what [he thinks] should be.” To be successful, you need to ignore the endless rumor and chatter about fundamentals, economic projections, news events, and analyst opinions about “fair value.” Price rules. Price tells all. Price is the trend follower’s main concern.