Latest news with #compoundgrowth
Yahoo
15-07-2025
- Business
- Yahoo
Investing Myth: Is Investing Just "Gambling"?
Gamblers chase quick, game-changing returns, but investors build wealth slowly through compound growth over time. Investing means buying actual ownership in companies. The line between risky investments and safe gambling bets might blur, but ownership makes all the difference. 10 stocks we like better than S&P 500 Index › Investing looks like a sophisticated form of gambling. However, there are huge differences between these two types of risk-taking behavior. If you're doing it right, long-term investing and short-term gambles are a world apart. Here are some of the main similarities and differences between gambling and investing. I promise to keep it quick: Gamblers and investors put real money into someone else's performance. Both take on a certain amount of risk in hopes of a positive return. In gambling, you're usually looking for a big gain -- very quickly. The promise of game-changing returns on your bet inspires the gambler to accept higher risks and more uncertain outcomes. Classic investing is all about building a financial return over a long time. Even a small annual gain can have wealth-building effects if you repeat the small increase many times. The mathematical magic of compound returns means that next year's gains will build upon the returns of every year before it. Most importantly, gambling usually involves games of chance or unpredictable sporting events. Investors contribute money to support a business, cryptocurrency, or other valuable asset, expecting that asset to gain value over time. The line between gambling and investing is blurred when you're looking at pretty safe bets (for example, "Will Florida see rain in August?") or risky business models (like, "Let's buy crypto with borrowed money!"). Even then, stocks represent actual ownership of the thing you're investing in, while gamblers stay on the sidelines, no matter how many poker chips and betting slips they are holding. That's what makes the S&P 500 (SNPINDEX: ^GSPC) different from a roulette wheel with 500 slots. Investors benefit from the earnest business efforts of other people, while gamblers just put down their money and hope for the best. It's not the same thing at all. Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,005,670!* Now, it's worth noting Stock Advisor's total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 15, 2025 Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Investing Myth: Is Investing Just "Gambling"? was originally published by The Motley Fool
Yahoo
15-07-2025
- Business
- Yahoo
Kevin O'Leary: This One Common Habit Is Keeping You Poor
Kevin O'Leary, the self-made millionaire and 'Shark Tank' investor known as 'Mr. Wonderful,' doesn't mince words when it comes to financial habits that destroy wealth. After decades of building and selling companies for billions, O'Leary has identified one common habit he believes is keeping millions of Americans poor. Find Out: Read Next: 'I can't stand it when I see kids that are making 70 grand a year spending $28 for lunch,' O'Leary said in a recent interview with 'The Diary of a CEO.' 'I mean that's just stupid.' But this isn't just about expensive lunches. O'Leary's criticism goes much deeper than a single meal — it's about a fundamental lack of financial discipline that he sees destroying people's long-term wealth-building potential. O'Leary's frustration stems from watching people miss the bigger picture of compound growth. When he sees someone spending $28 on lunch, he's not just seeing one expensive meal. He's calculating what that money could become over time. 'Think about that in the context of that being put into an index and making 8% to 10% a year for the next 50 years,' he explained. That $28 lunch, invested instead, could grow to hundreds of dollars by retirement. This perspective comes from lessons O'Leary learned from his mother, who built substantial wealth through disciplined saving and investing. She would take 20% of her weekly cash earnings and put it into dividend-paying stocks and bonds, maintaining this habit for 55 years. Learn More: O'Leary has a simple exercise he recommended to illustrate how wasteful spending habits develop: 'Go into a closet. Go into your closet and look at how much stuff you have you don't wear because you either bought it because you thought you were going to wear it and never wore it or wore it once and you end up wearing 20% of your portfolio all of the time and 80% you pissed away.' This closet test reveals a broader pattern of poor financial decision-making. People buy things impulsively, use them rarely and then repeat the cycle. Meanwhile, that money could have been working for them in investments. 'Wealth creation comes down to one word: discipline,' he said. 'The ability to look at something and say 'I'm not going to buy that. I'm going to keep that money working for me.'' This discipline isn't just about avoiding expensive lunches or unnecessary clothing purchases. It's about developing the mental framework to consistently choose long-term wealth building over short-term gratification. 'Not many people have that discipline,' O'Leary shared. 'Wealthy people have that discipline. You meet them later in life, you realize when they were young and had nothing, even the ones that were employees their whole lives that are now financially free had the discipline to say no.' O'Leary's solution is straightforward: automatically invest 15% of your salary before you have a chance to spend it. He's even built an app called Beanstocks specifically for this purpose, though he says there are many similar tools available. 'If you're making $70,000 a year and you put 15% aside from when you're 25, you'll have over a million and a half dollars if you just invested it in the stock index in the S&P 500,' he explained. 'That's what history has told you.' The key is automation. Removing the temptation to spend that money by having it invested before you ever see it. O'Leary's investment philosophy comes directly from watching his mother's success. She followed simple rules that anyone can implement: Never more than 5% in any one stock Never more than 20% in any one sector Focus on dividend-paying stocks and bonds Never spend the principal, only the dividends and interest 'When I saw the results, I said 'That's it. That's how I'm going to invest for the rest of my life,'' O'Leary recalled. Her performance over 55 years 'was extraordinary' and 'beyond any hedge fund.' What makes O'Leary's criticism so pointed is that he understands that the compound effect works both ways. Just as money invested early can grow dramatically over decades, money wasted on unnecessary purchases represents not just the immediate cost, but all the growth that money could have generated. Someone spending $28 on lunch regularly isn't just losing that money — they're losing decades of potential compound returns. Over a 40-year career, those lunch splurges could easily cost hundreds of thousands in lost wealth. O'Leary's message isn't about living like a miser or never enjoying life. It's about being intentional with money and understanding the real cost of spending decisions. Every dollar spent on something unnecessary is a dollar that can't compound and grow over time. 'There's so much stuff you don't need,' he said. The wealthy understand this principle and act on it consistently, while others remain trapped in cycles of consumption that prevent them from building real wealth. For O'Leary, the path to financial freedom is clear: Develop the discipline to say no to unnecessary purchases, automate your investing and let compound growth do the heavy lifting. Those who master this habit build wealth. Those who don't stay poor. It's that simple (and also that difficult). More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 6 Hybrid Vehicles To Stay Away From in Retirement The 5 Car Brands Named the Least Reliable of 2025 This article originally appeared on Kevin O'Leary: This One Common Habit Is Keeping You Poor
Daily Mail
27-06-2025
- Business
- Daily Mail
How putting off starting a pension for just five years in your 20s can cost you tens of thousands
Putting off starting a pension for five years in your 20s can create a £40,000 hole in your savings, new research reveals. A young worker aged 22 on £25,000 a year, who is auto-enrolled into a pension and sticks to saving through their working life could expect to have £210,000 by age 68. But the same fund would reach only £170,000 if you opted out until you were 27, and £135,000 if you waited until you were 32. That is based on minimum saving levels under auto enrolment - although if you put in more, many employers will increase their contributions too. The figures take into account pay rises, investment growth, charges and inflation over the years. Those who join a pension later miss out on the power of compound growth, which is hugely beneficial if you start young because it has more time to work, says pension firm Standard Life which did the calculations. Compound growth means because any investment return stays in your pot, you then make a return on that higher amount, and then a return on that even larger sum, and so on over and again. You might start with a small contribution to a pension, but making returns on your returns will still have an exponential effect in the longer run. If you are older and have already enjoyed the benefits of compound growth, it is worth showing young adults in your life the table from Standard Life below. (You can also tell them the story of Prudence and Extravaganza - scroll down for more.) Standard Life says young people have to strike a balance between putting money away for the long term, and meeting costs and goals in the nearer term. It admits pensions might not be on the priority list at that age - but stresses that if you do start early, your future self is likely to thank you for it. Dean Butler, managing director for retail direct at Standard Life, says: 'If your finances permit and your circumstances allow, the sooner you engage with and begin to contribute to your pension, the better your ultimate retirement outcome could be.' 'While delaying entry into the workforce, for instance to pursue further education, can offer long-term benefits, both financially and personally, it's important to be mindful that this might require you to contribute more later on to meet your retirement goals. 'Similarly, if you choose self-employment in your twenties, it's worth opening a personal pension, as you won't benefit from automatic enrolment via a workplace and could miss out on important early-career contributions.' Under auto enrolment people are signed up for a pension whenever they start a job, unless they actively opt out. The minimum contribution is 8 per cent of your earnings that fall between £6,240 and £50,270. But this is split three ways, with you putting in 4 per cent, your employer contributing 3 per cent, and the Government adding 1 per cent in tax relief. The wonder of compound growth: Prudence and Extravaganza 'Albert Einstein called compounding the eighth wonder of the world,' says Fidelity International investment director Tom Stevenson. To illustrate its power, Stevenson tells the tale of sisters Prudence and Extravaganza in his guide to compound growth for This is Money. Prudence starts saving £20 a week when she is 18 which gives her £1,000 a year. A combination of capital growth and dividend income gives her 10 per cent a year, plus she adds in a new £1,000 each year too. 'By the time Prudence is 38 she has accumulated £63,000 and now the extra £1,000 a year of saving starts to become irrelevant. By the time she is 60, she has accumulated a little over £500,000 even if she stops saving completely at the age of 38.' Extravaganza spends the years from 18 to 38 enjoying herself and not saving anything, but at 38 she sees her sister's success and starts saving £20 a week and earning the same 10 per cent. She never catches up. 'When they are both 60, Extravaganza has accumulated just £80,000 compared with her sister's half a million. And with every year that passes their fortunes diverge even further.' How to boost your pension pot at any age Dean Butler of Standard Life offers the following tips. 1. Make sure you're taking advantage of all the benefits of your pension plan and of the pension support offered by your employer. If your employer offers a matching scheme, for example, where if you pay additional contributions they will match them, consider paying in the maximum amount your employer will match to get the most out of it. 2. Getting a bonus this year, or receiving overtime pay? Deciding to pay some or all of your bonus into your pension plan could save you paying some big tax and National Insurance deductions, meaning you could keep more of it in the long run. Similarly, if you're working overtime and you're able to direct some of your overtime pay into your pension, even relatively small extra contributions can build up over time. If you're able to, think about paying a little more into your pension when you get a pay rise or have a little extra savings. 3. Keep an eye on your investments, the returns they're giving you and whether they match the level of risk you're comfortable with. Higher-risk investments potentially see more growth over the long term, but their value might go down and up more frequently and dramatically. Lower-risk investments, like particular types of bonds, are less likely to see drastic decreases in value, but you might not experience particularly significant growth with these. In your 20s, you might feel happier with some higher-risk investment, as your pension has more time to potentially recover from dips in the market – but this won't be right for everyone.
Globe and Mail
21-06-2025
- Business
- Globe and Mail
1 Stock That Turned $1,000 Into More Than $1 Million
Investors understand that when you extend your time horizon into decades with high-quality businesses, the power of compound growth can work wonders. This is why it's so beneficial to be a long-term owner of companies, allowing their improving fundamentals to positively impact your portfolio. This strategy is far more consistently reliable than constantly trying to time the market. With this perspective in mind, there are definitely some businesses that have generated tremendous wealth for their long-term shareholders. In fact, here's one stock that over the course of the past 28 years would have turned a $1,000 initial investment into a holding worth more than $1 million. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Becoming one of the world's dominant enterprises Since this company's initial public offering in May 1997, its shares have produced an unbelievable return of 217,000%. Had you been able to allocate $1,000 to this stock when it went public, you'd be staring at a balance of nearly $2.2 million today. The company in question is none other than Amazon (NASDAQ: AMZN). Its journey -- characterized by constant innovation and pushing the envelope -- has been nothing short of spectacular. Amazon started out in the mid-1990s selling books online. While this was a narrow focus, it was a revolutionary idea at the time. The company wanted to stick to a product category that was easy and low-risk to ship, and one that had a massive selection of items for shoppers to choose from. Over time, Amazon evolved to start selling virtually anything under the sun, and it continues to expand its footprint. In December, for example, the business launched a partnership that allows consumers to buy new Hyundai vehicles on its e-commerce site. The entire car-buying process, from arranging financing to scheduling the delivery from a nearby dealer, can be handled on Amazon. The company enticed shoppers to spend more money on its site by pioneering fast, free shipping, and offering it as a perk of its Prime membership program in 2005. Today, it is estimated that there are more than 200 million Prime members across the globe. In 2006, the company began offering Amazon Web Services (AWS) to external customers. Management realized that other businesses might need solutions to scaling IT infrastructure based on changing needs -- the same issue Amazon faced with its e-commerce operation. In 2024, AWS generated $108 billion of revenue and $40 billion of operating income. It is the world's largest cloud-computing infrastructure provider and a major artificial intelligence (AI) platform. Thanks to the tremendous amount of traffic gets these days, as well as the success of the Prime Video streaming platform, Amazon has become an advertising juggernaut. During the first quarter of 2025, it collected $13.9 billion in digital ad revenue. What the future might hold With a market capitalization of $2.3 trillion and trailing-12-month revenue of $650 billion, Amazon has grown into a colossal entity and delivered incredible gains to its long-term shareholders. But it would be unreasonable to expect it to do anything similar in the future -- it's already one of the five largest companies in the world. Growth can't continue at a rapid pace indefinitely, and given Amazon's current scale, there are limited opportunities for it to do things that could move the financial needle. That doesn't necessarily mean Amazon isn't a worthy investment candidate, though. According to Wall Street consensus analyst estimates, its revenue is projected to increase at a compound annual rate of 9.5% between 2024 and 2027. That's certainly an encouraging sign. Even better, its bottom line is soaring thanks to cost cuts and operational efficiencies. Diluted earnings per share (on a split-adjusted basis) went from $3.21 in 2021 -- and a $0.27 loss in 2022 -- to $5.53 in 2024. Those impressive gains make the current valuation reasonable, in my view. As of June 19, the stock trades at a forward price-to-earnings ratio of 34.3. Amazon won't turn a $1,000 investment into $2.2 million over the next 28 years. However, this business should be on every long-term investor's radar. Should you invest $1,000 in Amazon right now? Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $664,089!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $881,731!* Now, it's worth noting Stock Advisor 's total average return is994% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
Telegraph
22-05-2025
- Business
- Telegraph
Babies to be given $1k ‘Trump bank accounts'
Babies will be given 'Trump accounts' with $1,000 (£745) as part of a sweeping piece of legislation that the president has dubbed his 'big beautiful bill'. The measure passed through the House of Representatives on Thursday as part of an expansive tax package, which now faces a vote in the Senate before it is sent to Donald Trump's desk for signing. Republicans renamed the 'money accounts for growth and advancement' – or Maga for short – to 'Trump accounts' on Wednesday, even though the policy was spearheaded by Texas senator Ted Cruz. Under the plan, the US government will invest $1,000 in a fund that tracks a US stock index for children born between Jan 1 2025 and Jan 1 2029. They will be able to withdraw the sum when they become an adult for expenses such as college, buying a house, or capital to start a small business. Parents and third parties will also be able to contribute up to $5,000 if they open up one of the accounts on behalf of their child. Mr Cruz said the move provides children with 'the miracle of compound growth, the ability to accumulate wealth, which is transformational'. The senator claimed he did not mind the fact that his policy had been rebranded, telling Business Insider: 'What I care is that they remain in there. I think it doesn't matter what they're called. What matters is what they do.' Karoline Leavitt, the White House press secretary, singled out the measure as she hailed the passage of the budget reconciliation bill by a single vote through the House on Thursday. Calling the legislation 'the final missing piece toward ushering in the golden age of America', she said it would provide 'Trump savings accounts for newborn babies'. Democrats, all of whom voted against the bill in the House, criticised the attempt to brand the initiative 'Trump accounts'. 'You all would be screaming bloody murder if we named savings accounts after Barack Obama,' Joe Neguse, a Colorado congressman, told the chamber. It isn't the first time Mr Trump has faced such criticism. In his first time he sent Covid stimulus cheques to taxpayers bearing his signature, even though the measure was financed by federal funds.
