3 Things 4-22-24
Thing One
Yes, The Rich Tend To Get Richer, But So Can The Average Joe
Here’s a quote from an August 2020 Wall Street Journal article:
“Stock ownership is increasingly concentrated among a sliver of the population. The top 10% of Americans, by wealth, owned 87% of all stock outstanding in the first quarter, according to data from the Federal Reserve. That share has grown over the past decade, from 82.4% in 2009. The stock market has surged over that period, with the S&P 500 more than quadrupling from its low during the financial crisis in March 2009.”
To magnify the final point in the paragraph above, we'll point out that if you had invested $1,000 in the S&P 500 in March of 2009, it would be worth over $7,500 today (including dividends). Anybody who was invested in the S&P, not just the "rich", got richer. That means all of us who owned or had access to 401ks, IRAs, or individual investment accounts had a chance to get richer. But when the statement, 'the rich get richer' is made by someone, it is typically meant as either an introduction to, or a reminder of, the notion that it is unfair that there are "rich people" and that the initial unfairness leads to more unfairness. That’s divisive talk. Common sense rather than fairness dictates that if you aren’t investing, there won’t be any investment returns (additional riches) to be had by you. For (actual) fairness’ sake though, anybody who’s sincerely interested in accumulating wealth can do so, either on their own or with professional help.
There’s nothing you can do about what you've missed out on in the last 15 years, but you don't have to keep missing out.
Thing Two
Things I Wish Somebody Had Told Me In My Twenties
A recent article with the above title had a long list of items on it. Here are five of our favorites:
1) Credit cards are black holes.
2) Thirty years from now you'll wish you had invested more in stocks.
3) Put retirement first (not buying a house).
4) Insurance is a must.
5) You'll end up treasuring almost nothing you buy.
We intend to delve into each of these topics starting with item one, which we discuss below:
We all generally understand how credit cards work. You buy something using a bank's money instead of your own. If you use the bank's money out of convenience and pay the money back before the interest clock starts to tick, you'll be just fine and will never experience the black hole phenomenon. On the other hand, if you weren't just borrowing out of convenience and didn’t have the money, the bank will alow you to pay the money back over time to help ease your financial burden. In fact, they are so intent on easing your financial burden that they will even allow you to make minimum payments, which are typically between 1% and 3% of the outstanding balance. But if you opt to take advantage of that added convenience, you'll end up paying back much more than you initially borrowed. As an example, a $5,000 purchase made at 20% interest (typical on credit cards) where only a minimum payment of 3% is made will cause the borrower to make total payments of $10,990 and not clear the debt for 21 years! That's what a financial black hole looks like.
Any company in the credit card business hopes you don't ever think about this too hard. We hope you do.
Thing Three
Just A Thought
“If you don’t know, the thing to do is not to get scared, but to learn.” — Ayn Rand
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