If you can stick to your investment plan then you can potentially do very well if you just give it time. That’s the magic of compound interest. Look what it did for one of the vampires from the Twilight Saga. Carlisle Cullen has been investing for almost 400 years. I’m not sure, but I think vampires are pretty much immortal so long as they aren’t exposed to sunlight, don’t get staked through the heart, etc.
Super Long Time Horizon
Forbes recently released the Forbes Fictional 15 list of richest people in the world and Carlisle Cullen ranked first with a net worth of about $34.1 billion. This was attributed to “compound interest and long-term investments”. You could use this as an example of starting early, but really it’s an example of living long. Maybe Carlisle didn’t start investing until he was 100…
The power of 1%
Longer time horizons can show us the power of 1%. You might get that extra 1% from a more aggressive portfolio, reducing fees, reducing taxes or even just sticking to your original plan and not second guessing yourself. But let’s take a look at how much of an impact this would have had for a vampire.
If a vampire invested $100/month, or $1,200 per year for 400 years with a long term rate of growth of 4% they would have just under $200 billion.
At 5%, it would be over $7 trillion.
At 6%, it would be over $265 trillion.
At 7%, it would be almost $10 quadrillion.
Cullen Not a Strong Investor
While $100/month would’ve been a fortune in the 1600’s, it would be a pittance today. Perhaps Cullen didn’t invest that much early on, but today he should be able to sock away thousands (if not millions!) per month. Given that the long term rate of return on equities has been 6-7%, it’s actually a bit surprising that Cullen is “only” a billionaire.
Of course, this brings us to our last lesson we can take from this vampire billionaire. The market return is rarely achieved by the investor as they tend to buy after markets have done well, and sell near the bottoms of the market – the exact opposite of the buy LOW, sell HIGH mantra of investing.
Perhaps vampires and humans are not so different after all…
Get serious Preet,
Where could anyone invest $10 quadrillion?
As a former FP, how much for an annual fee? $100 trillion?
@Mark – I would probably buy the moon, other real estate, or perhaps US treasuries. That would be after owning all the stocks in the world, and I’m sure I could find a hedge fund or two who would take my money – and if they didn’t I’d just bite them.
As for a fee I would grant my advisor immortality… duh.
It’s a good thing that he’s letting his money work for him… nowadays you have to be prepared for the possibility of your retirement lasting more than 30 years! ;)
It’s nice to see a serious post about vampires without any gush or fainting from the soccer moms. That’s a nice way of showing the beauty and power of compound interest as well. Way to go :)