Felt cute, might invest later.
(ROI of Investing)
August 7, 2020 by The Q.ai Team
“What a time to be alive”Drake (and sometimes Future)
Hello everyone! Welcome to the first edition of Investing Reimagined. We think that investing is chill and wish more people who looked like these cool cats and kittens were into investing, too.
Our aim is to help you keep tabs on what’s going on in the investing world right now, and help you make sense of the rest of it. If you ever have questions you’d like us to address, feel free to reply to this email or DM us on IG or Twitter.
Stories that dominated headlines this week
- TikTok will either get banned from the U.S. (Trump has signed an executive order) or will be sold to Microsoft. Microsoft was initially in talks with ByteDance, TikTok’s parent company, over the acquisition of its U.S. operations but has upgraded the deal to its entire global business unit (Europe, India, etc). Apparently, Apple allegedly threw its hat in the ring at some point (?), but right now it looks like Microsoft is the presumptive nominee. Read more.
- Facebook launched its own version of TikTok called Reels. Facebook is notorious for dipping a toe in many different areas of business by way of acquisition (think: Instagram, Oculus, WhatsApp) but has not been known for its homegrown product lines (with the exception of Facebook, obviously). Unpopular opinion: Vine is the same as TikTok. There’s clearly a market here. Twitter should bring back Vine. *starts petition* Read more.
- Kodak’s unmissable (and epic) rise and fall gets tapped for an SEC investigation for potential insider trading. This is a classic story of boy meets girl. Boy stops being relevant in the space for digital cameras. Girl has a big $765 million government loan for producing drug ingredients. Girl gives boy that loan. Boy keeps loan a secret but its digital camera business skyrockets in value days before announcement anyways. It’s a true love story shrouded with mystery. I look forward to Season 2. Read more.
Per my last email re: the economy
- The Labor Department’s monthly jobs report shows the U.S. added 1.8 million jobs, narrowly beating the expected 1.48 million new positions in July. This is a win, but is wimpy in comparison to the 4.8 million jobs added in June. Read more.
- Weekly unemployment claims were on a downward spiral for the last 2 weeks, but numbers came in at the lowest since the pandemic hit. Read more.
- This welcome news doesn’t mean we’re out of the woods yet. We’re not even close. Many signs are pointing to a v-slow recovery. Read more.
Why is this important?
Many will debate whether the economy and the markets have an inextricable relationship, but most will agree that if the economy is in bad shape, people won’t have money to spend. That hurts certain types of stocks, bringing its valuation down and making it a less attractive investment.
An example, IRL
Oil & gas has taken a beating from the pandemic. If you think about it, no one is driving cars to and from work, which is a big source of demand for gasoline. This also affects travel.
The key to investing: just doing it
Regardless of your final goal, every investor is throwing money toward the same hope: that their money will make more money. However, the younger you invest, the more money your money will make in the long run.
“While not everyone who invests automatically becomes rich, almost everyone who invests for fifty years becomes richer than their peers who don’t.”
Whether you can afford $100 a month or $1,000, starting early and sticking with a regular investing schedule – even in poorly performing markets – will generate a far greater return on investment than intermittent (or not) investing.
Rather than expend a lot of language describing why this is true, we’re going to jump straight into some examples. For each of these examples, we’re going to assume that our investors:
- Invest an initial sum of $200 plus $200 per month
- Earn a modest 5% return rate on investments
- Pay no taxes until the funds are withdrawn
Investor 1: Susan Smart
- Invests $200 of her birthday money into the stock market on the day she turns 18 years old
- Continues to invest like clockwork until she’s 65 – a total of 47 years
- Invests nearly $113,000 of her own money into the market in her lifetime
By the time she’s ready to leave the workforce, she’s amassed almost $326,000 in interest on her return, bringing her portfolio value to $439,000. That’s a pretty tidy nest egg to kick off her retirement
Investor 2: Steve Stubborn
- Doesn’t start investing until his 45th birthday
- After seeing some small returns and looking at the state of his retirement plan, he decides to invest faithfully until he retires at 65
- Invests about $48,000 of his own money into the market throughout his 20 years of investing
Steve has only earned $34,000 in interest, for a final portfolio value of $82,000. While this is nothing to laugh at, it’s also a pittance compared to the gains seen by Sue, who started so much younger.
The Bottom Line?
The earlier you invest, the richer you’ll be.
This episode is with Alexa von Tobel, the founder of LearnVest – a personal finance and investing company. It will sell you on why you should start investing today.
We like the way she explains the widespread struggle Americans have with growing wealth, paying off debt and saving for retirement. This is a good place to start.