Richard C. Young & Co., Ltd. is a registered investment advisor and has been ranked by Barron’s as one of the top independent advisors in the nation for the last five consecutive years. We manage portfolios for individuals, families, and small businesses throughout the United States.
Would You Rather Have $1 Million or a Penny That Doubles Daily for 30 Days?
Long-time client Tom recently emailed me the following question and answer. I have seen various versions of this in the past, and I always enjoy rereading it. This piece appears to have been from the company Grow, www.grow.acorns.com, which has partnered with CNBC to deliver educational features on developing successful money habits.
As you know, we are fans of the simple but effective strategy of compound interest. Compounding is the process of using your dividends to buy more shares of the company that just paid them to you. Over time, the act of continually reinvesting dividends creates a snowball effect in which your initial investment grows exponentially.
Last year ended on a sour note for stock-only investors, with the S&P 500 losing more than 9% in December and more than 13% for the quarter. December’s performance was the second-worst December on record for the index. While we weren’t surprised by the correction, the magnitude of the decline looked excessive given the lack of any meaningful negative surprises.
The New York Times ran a piece in December titled “Investors Have Nowhere to Hide as Stocks, Bonds, and Commodities All Tumble.” The article highlighted the difficulty investors faced in 2018. Most major asset classes fell last year or edged out minimal gains in the final few days of the year.
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