The subject of long-term investments isn’t something that we cover in Market Maven very often, but it’s worth remembering that even as day traders, we should always have our eye on the long game, because that is where the true wealth is to be found.
Why consider long-term investments?
Picking up just 10 or 20 pips a day, may sound like small change – but it’s exactly this kind of steady approach to trading that delivers life-changing sums of money.
Last week I came across a great list on the web called “What if I had bought Apple stock instead?” Kyleconroy
I can see on the list, my first Apple PowerBook G4 – damn I thought that machine was sexy when I bought back in 2002 for what I’m sure (once I’d added the extras) was more than the $2999 on this list.
But if I’d spent that money on Apple stock, it would be $94,334. Even more sexy!
And that first ipod mini that my wife bought me for Christmas in 2003 – if she’d bought me Apple shares instead, they’d be worth $6,103.
The list was compiled back in 2010, and I haven’t been able to work out exactly what stock price they are using as “current”, so I expect these prices would now be considerably higher (I haven’t sat down and worked it out according to stock-split dates etc).
But whatever way you look at it, it’s a lesson in how most of us could be putting our money to better uses.
Your hardest working employee
For most people, having a day job is enough to provide us with the basics in life. You keep your money in the bank, and you’ve funds to feed, clothe and house your family.
But if you want more, then you’ll need to have additional plans to supplement your income.
Perhaps it’s getting a second job.
Or perhaps it’s using your money to do that second job for you.
Let’s face it – how many of the super-rich do you think keep all their money in a bank account?
They don’t – because they view their money as an employee – and a very hardworking employee at that.
And the best way to keep that employee working hard is through compound investing.
Compounding is simply the process of reinvesting (rather than spending) your profits. There’s nothing complicated or clever about it – but doing this gives you the opportunity to turn your profits exponential, as you can see in this article from last year.