itsyoung!!
Veteran
50% ? help explain that to me
so if I invest at betterment.com with $5000, in 12 months id get $2500 back ?
CREATING MILLIONAIRES: POSTERS AIDING WEALTH GROWTH
- Thread starter Sunalmighty
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50% ? help explain that to me
so if I invest at betterment.com with $5000, in 12 months id get $2500 back ?
BaldingSoHard
Veteran
Unfortunately, past gains are Markovian. That is, there are no guarantees in the market based on past performance, especially just before a correction is expected.
I'd say investing right now, you can be sure you won't get a 50% rate of return. I got lucky and got in during one of the hottest markets in history.
And actually, that's the time-weighted rate of return. It means that some of my money earned more than 50%, some earned less. It's sort of hard to explain without having seen it in action over the time period.
Having said that, there's still money to be made. Normally I'd advise against trying to "time the market". What that means is trying to predict what the next trend is going to be and betting on it. Smart money says put your money in the market and let it do it's thing. Upward or downward movement in the short term is to be ignored because the overall trend will be upward. Anyway, the short answer is "no", you probably won't earn 50% in a year.
To simplify the answer, if you have investible money, I wouldn't put a large chunk in the market all at once right now. What I would do (this is Warren Buffet's advice, btw) is make regular maybe bi-monthly contributions to a brokerage acct like betterment.com or something that's been setup by a financial advisor. That way you're sure to cost-average everything and make sure you don't get fukked when the market corrects. This would be an awesome strategy for a new investor since when you first start out, you really want the cost of shares to drop for a few years.
I know most of this doesn't make sense so to make it simple...
- If you have $0 in the market right now, start putting say $150 - $300 a month into an investment account. You will probably see the value of this account drop over the first few years (market correction) and you will be discouraged but it's OK because what you're really doing is buying your first shares for cheap. These are the shares that will earn you the most money because you will have held them the longest and really you want them to be cheap and plentiful.
- No matter how much it looks like you're losing money, KEEP BUYING. I know it defies conventional wisdom. The thing to keep in mind is that this is a long-term plan. You won't need this money for 20-30 years. Trust me when I say it will grow, and it will grow BIG. But you need to have a good number of shares in order to reap the benefit of your patience.
Edit: Actually disregard this. The first investment everyone should make is in their companies' 401k plan. The reason is because your employer will contribute to your account for you. That is, they will give you their money to invest that you get to keep. It's a no-brainer.
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newworldafro
DeeperThanRapBiggerThanHH
naw..this system is about to collapse anyway
dennis roadman
nuclear war in my bag
Warren Buffett bought a lot of the companies I held stock in
I guess that's a good thing right?
Truth be told I pay a guy to manage my brokerage accounts and investments. He's done really well so far
Good advice. I've had Vanguard for years. Conservative investments so the growth is never that great but it is consistent.
BaldingSoHard
Veteran
If you're young, might wanna think about going more aggressive. Youth should be used for acquiring gains. Being conservative is for when you're older and you want to hold onto those gains as much as possible.
Kenny West
Veteran
good look, I wasn't hip at all.
BaldingSoHard
Veteran
Absolutely definitely. It's a direct impact, in fact.
↓R↑LYB
I trained Sheng Long and Shonuff
@BaldingSoHard just opened up a betterment account breh 
↓R↑LYB
I trained Sheng Long and Shonuff
I'll tell you why.
There are 3 factors which determine how much wealth you will earn from your investments.
Basically, the money you earn will be equal to the principal you invest times the rate of return over the time period of investment. Don't worry if that sentence doesn't make sense to you... by the time it matters you'll have a good understanding of this stuff.
- Amount invested (principal)
- Rate of return
- Time invested
Anyway, of those three factors, time invested is by far your greatest asset in building wealth. It's also the factor which you have the most control over. Google "compound interest" to learn more about this. It's actually very interesting.
The problem with the time factor is that you have a limited amount of it due to the contribution limits of an IRA. You are only allowed to contribute $5,500 dollars per year to a ROTH IRA. That $5,500 is the principal in the above list.
So every year you wait to start your IRA, you're missing out on:
Not investing in your 20's is literally a missed opportunity. You cannot get that time back and you cannot make up for the principal that you didn't invest when you had the opportunity until you're older and at that point you can't take advantage of compound interest over 30+ years. There's a reason us 30+ brehs in here are saying, "I'm pissed I didn't do this in my 20's". Because we missed out on hundreds of thousands of dollars of investment gains just due to the time we won't have to let those investments grow.
- Contributions to your principal investment
- Time for that money to grow
Yes, hundreds..of..thousands..of..dollars. Yes, breh. The difference between starting in your 30's and starting in your 20's is the difference between downsizing in retirement vs retiring comfortably and in your dream home.
Last and most importantly, here is a tidbit I tell to people who are wary about starting to invest.
If you were to ask any 10 investors, "Where should I put my money right now?" you would get 10 different answers. Everything from a certain stock, to mutual funds, commodities, real estate, money market accts, etc.. etc.. etc.. No two investors will give you the same answer. Having said that, there is one thing that every investor in the world can agree on. And that is that every single one of them without exception will tell you they wish they'd started investing at a younger age. The reason for that is because time is your greatest ally when building wealth. Every year you wait is a missed opportunity. Go get money, breh.
To put this graphically, look at this Roth IRA calculator:
Just waiting 5 years in investing in your roth will cost you half a million dollars.
Waiting 10 years will cost you 800k
BaldingSoHard
Veteran
To put this graphically, look at this Roth IRA calculator:
Just waiting 5 years in investing in your roth will cost you half a million dollars.
Waiting 10 years will cost you 800k
Picture = A thousand words. Thanks breh this puts it into even greater perspective. I just hope some of these 20-something brehs take the advice.
BrehMan
Old Avi from :hamster:
The God Poster
LWO representa
how exactly does a Roth work...my mom dukes been telling to get on it. How if she did it my age she would be caking by now.
And how the IRA work?
im getting too old not to know how shyt worksJust recently got a secure credit card. .I literally have zero credit
Brehs help
