The markets took a bit of a breather today after the 3-day, 400 point rebound we have seen on the Dow. Selling was mild despite oil prices shooting closing at $104 a barrel.
There was certainly no help from the earnings picture today as Walgreen Co. ( WAG ) and Carnival Corp ( CCL ) pushed lower following their earnings results. Canadian railway play Canadian Pacific Railway Ltd. ( CP ) also got hit after giving much lower-than-expected guidance. The news of common stock offerings took down high-yield plays American Capital Agency ( AGNC ) and Invesco Mortgage Capital ( IVR ). Meanwhile, Wall Street upgrades helped bump shares of Tim Horton's ( THI ) and Nordstrom Inc. ( JWN ) higher by the close. A couple of more dividend increases from the financial sector today, with Bank of New York Mellon ( BK ) and Fifth Third Bancorp ( FITB ) announcing boosts in their payouts. Both stocks were little moved by the close.
I want to spend some time today talking about the power of compound interest and why age isn't as big an issue as many think if you are putting your money in the right income-producing investment vehicles. Let's look at some examples using our compound interest calculator .
Investor #1 starts investing $5k a year at age 25 and does so for 40 years ($200K total invested) in Bank CDs, money markets, etc. averaging 3% a year. After 40 years, this person's nest egg becomes worth just over $652K.
Investor #2 starts investing just over $4K a year at age 45 and does so for 20 years ($81K total invested) in dividend-paying stocks that historically average an 11% annual return, this person's nest egg becomes worth over $653K.
Investors #3 starts investing $5K a year at age 55 and does so for 20 years ($100K total invested) in dividend-paying stocks that historically average an 11% annual return, this person's nest egg becomes worth over $806K.
First of all, you see how strong a factor compound interest is when it comes to putting money to work over a period of time. Then, you will notice the danger of being too conservative with your money (as Investor #1 is). They had the right idea is starting young, but they chose too conservative an investment road. Lastly, you see that age is not really a factor when it comes to being invested properly. This example should inspire many individuals who make the mistake of thinking it's too late to make a difference for your retirement. It certainly is not, as long as you're investing in the right dividend-paying stocks! Anyone that read last week's data from EBRI stating 27% percent of workers said they are "not at all confident" about their retirement savings (Another 23% said they are "not too confident" - amounting to about half of workers worried about saving enough for their future retirement) should find solace in the example I have given above.
The retirement story can hit hard for women especially. The latest statistics show that women earn about 76% of what men earn over their lifetime. Plus, women spend an average of 12 years out of the workforce, whether it's taking care of children or loved ones. Other key factors for women to consider when it comes to getting a handle on their own retirement: potential for divorce, women tend to live longer so longevity is a concern, a married couple's combined Social Security benefit tends to be reduced by one-third to one-half when one spouse dies (again, women usually outlive men).
The bottom line is for individuals to get started and consistently stay with the process of building a huge nest egg, whether it is starting from scratch and opening your first online brokerage account, educating oneself as to what dividend stocks can work best to generate returns, automating the process of getting money to be put to work into your brokerage account, and lastly just keeping a watchful eye over your portfolio each month. No one will care more about your finances than YOU!
There is an old adage that says "luck is what happens when preparation meets opportunity." I'll accept that as just part of the overall equation. Everyone that reads my daily newsletter knows I am a preacher of persistence, consistency, and sacrifice. Yes, the more you prepare, the more often luck seems to come your way. Throw in many other factors that go with that, including those willing to put "sweat equity" into building ideas into dreams. Are you "lucky"? If not, the time to start getting lucky is now!
Thanks for reading, and I'll see you tomorrow! P.S. Please pass this e-mail on to someone you think can use some financial motivation. Thanks again!
Created by Dividend.com