The Difference 1% Can Make: How ONE PERCENT Adjustments Can Make You Rich (Investing for Beginners)

The Difference 1% Can Make: How ONE PERCENT Adjustments Can Make You Rich (Investing for Beginners)

In this video, I will discuss the difference just 1% can make in the world of investing. And to demonstrate the power of compound interest I will consider the situation of a real person. I reached out to you on Instagram as I was looking for someone who was willing to share his or her age, monthly income, savings rate, planned retirement age and starting balance.

So what do I mean by the difference of 1%? Well, when it comes to the magic of compounding, there are exactly four variables that will determine your long-term outcome. Playing around with these compound interest variables can have a tremendous impact. So what are these four variables? Well, there is your starting balance (Do you already have some savings, some investments? Or are you starting from scratch?) Then you should consider your monthly contributions, your investment horizon (how long are you investing for), and finally the rate of return your investments generate.

As a benchmark, we use a broad-market index fund. Andy is 28, he is working as an engineer and his current take-home-pay is $3,150 of which he currently puts away $950 (a savings ratio of almost 33%). Andy plans to retire at age 65 and he already has $25,700 in savings and investments (his starting capital). We assume Andy invests in a broad-market ETF that will generate a compound annual growth rate of 9% over the course of the next couple of decades. Andy will continue to put away $950 each month for the next 37 years and enjoy these returns until he eventually retires at age 65.

If we plug these numbers into a compound interest calculator, we will learn that Andy’s net worth will grow to roughly $4,077,000 over the course of the next 37 years.

Now the premise of this video is to showcase what a difference of 1% can make. 1% doesn’t sound like much right? But I am about to show you that due to the power of compound interest, 1% can indeed make a massive difference. So what do I mean by 1%? Well, let’s apply the 1% to each of our compound interest variables. As a rule of thumb, we can say that the longer the investment horizon, the larger the impact of these 1% differences will be – that's how compounding works.
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○ How Charlie Munger Outperforms the Stock Market Using This Simple Strategy https://youtu.be/HLw4dhHUI-g

YOU CAN ALSO FIND ME HERE:
○ Twitter: https://twitter.com/renesellmann
○ Instagram: https://www.instagram.com/rene_sellmann
○ Facebook group: https://www.facebook.com/groups/454691045336200

OTHER LINKS:
○ My "Can You Beat The Pros" video: https://youtu.be/pIbOVfV7s7U

MUSIC:
○ https://www.epidemicsound.com/track/XNAVI0V4Xe/
○ https://www.epidemicsound.com/track/5H6HCB7ThW/

Chapters:
0:00 Intro
1:13 The Plan
1:41 Four Variables For Financial Success
2:22 Meet Andy!
3:24 Defining a Benchmark
4:06 1% Differences
4:38 Monthly Savings
5:40 Investment Horizon
6:55 Rate of Return
8:30 The Engine of Capital Growth
9:36 Downside Risks
10:20 What to Focus On
DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.

Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.

In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.

I hope you enjoyed the content!

Видео The Difference 1% Can Make: How ONE PERCENT Adjustments Can Make You Rich (Investing for Beginners) канала René Sellmann