It really is simple. Imagine that the summer before you left for college, you worked and managed to save up $10,000. You, with incredibly foresight and maturity, know that it’s going to get much harder to invest on your own once you are faced with student loan payments, a mortgage, car loans, diapers, electric bills – you get the idea. You’re a big fan of investors such as Warren Buffett, who at 76 years old, has amassed over $50 billion. Realizing that you don’t need anywhere near that much, you want to create a backup fund that silently, yet powerfully, works for you without anyone in your life knowing about it.
Here’s what you have to do:
- Take the $10,000 of capital and divide it into four piles.
- Choose four excellent, blue-chip companies that are likely to earn high rates of return for long periods of time such as Coca-Cola, Hershey, William Wrigley, or General Electric
- Open a direct stock purchase plan account with each of these firms to buy shares for very low commissions, such as $1 or $2 per trade
- Choose the option to have all dividends reinvested
- Stick the certificates and paperwork in a safe deposit box at a local bank. Now, ignore them for the next 46 years.
- When you are the same age as Warren Buffett is now (76 years old), return to the safe deposit box. If history holds true and you managed to earn the historical rate of return on equities, you should have roughly $6,388,918 in equity built up as a result of the long compounding period.
Now, if you want to live well during your lifetime, you’re going to have to do what you planned on originally – work hard, get a higher education, invest intelligently, and control your expenses. But it is comforting to know that no matter what you do, there is a secret portfolio compounding for you in the background that can provide you with your wants and needs?