- Some investors like Warren Buffet become
rich whereas others don't succeed
- Banks and brokerage firms make money
- In investing it doesn't matter from where you start, but which way you go
...and, last but not least:
- How you can become wealthy by following the basic principles of investing
Basically, it's all about the effect of
compound interest. It says that whereas some numbers can grow in an
arithmetic progression (like 2,4,6,8,10,12,14...), others numbers grow
exponentially (like 2,4,8,16,32,64,128...) like in
Moore's Law. We'll explain this concept
deeper at the bottom of this page.
The stock market as a whole, like the Dow
Jones or the S&P 500, has grown historically around 10-13% annually since
the 20's, 50's or 80's. Let's say you invested only $2,000 annually and started
at age 25. How much is your worth when retiring at age 65? Take this, you'd be worth
$1,111,481. You'd be a millionaire, even when calculating with only 10% interest.
What if you'd add more than $2,000 a year at some point in your life? Please
make this calculation with the ITI Investment Calculator
to find out for yourself.
Now let's come back to Warren Buffet. He is the second richest man on
this planet and the most known investor. How much did he make a year? 70%, 80% or
more? No, he made 22% annually on average. You can easily find this and any other
information we publish here on the Internet and in books, if you don't
Now, let's look at banks. What business are they in? The answer is: They
buy and sell money. They buy it around 2% and sell it around 9%. So they
gross in around 7% on their money (actually your money). No, wait,
additionally they invest your money and can make another 10%. What do you think
a bank will tell you? You can guess: "Put your money in a savings account."
So, let's step ahead. How do brokerage
firms make money? Since 1933, brokerage firms and banks have to be separate
entities by law. In other countries besides the USA, where this is not the
case, the quantity of people investing in stocks is much lower as in the US.
Guess, why financial institutions there tell people they should put their
money in savings accounts. In the US, where brokerage firms have a lot of
power, they tell people to invest their money in stocks. This situation is
by far superior to other countries. That's the reason (amongst others), why
the US is the dominant power in the world. Businesses have enough money,
thanks to the stock market, to work efficiently. But how do brokerage firms
make money? Well, first of all by fees. Stock brokers will tell you to "sell
one stock and exchange it for another" to generate brokerage fees. Enough
has been written about analyst, which work for brokerage firms, so we don't
want to add more gas to the fire. We want to come back to what's important
for you: How can you make money and achieve a good return? Well, be
independent, at least in part, invest some money with brokerage firms, but
take some money apart and make your own decisions. We'll help you in
choosing stocks, which are not fashionable with brokerage firms, but do
offer a high return.
If you have studied the
ITI Investment Calculator, and we strongly
recommend to do so, you have already discovered that you can make big bucks
in achieving a great return as a percentage of money invested. As well, you
can easily verify with this calculator, that it is not important to start
with a lot of money, what is really important is the effect of compound
interest and achieving a high percentage of at least part of your money
invested. So, now let's get a little bit deeper into this magic effect of
Maybe you have already learned through the
ITI Investment Calculator, that the double
rate of interest doesn't mean that you'll achieve the double return of your
money over time. Yes, 20% interest means that you'll have double
return than having 10% interest, but, only after one year. 20% interest
means having double interest over the first year, but, as well, over the
second year, which is 44% by then. A quick example: Say, you invest $1,000.
With 10%, you'll have $1,100 after the first year and $1,210 after 2 years.
With 20%, you'll get $1,200 after the first year and $1,440 after 2 years.
See, where the 44% come from? If you do this calculation for 10 years, you
receive $2,540 with 10% and, what a wonderful effect, $6,192 with 20% with
the same amount invested. After 30 years, you can have $237,376 with 20%,
instead of $17,449 with a 10% return. So, wouldn't it be great to have some
money invested with a high(er) return?
In Stockletter.tv we email you instantly,
when there is another great buying opportunity. We inform you at what price
to buy and then again, when and at what price to sell. Additionally, you can
use the ITI Compound Interest Calculator
to decide when if this is the right moment for you to sell to maximize your
That's what we are doing. You can use our
calculators to see you how
to achieve a higher annualized return by buying and selling wisely. We recommend stocks, which
are depressed by
20%, 30% or even higher. They are momentarily out of fashion, but are poised to pull back soon,
easily giving you a return
of 20% or 30% within months. This let's you appreciate the effect of compound interest.
Ignore this at your own risk, don't only
count the money you are receiving, but the money you are not receiving on
your investments and which you should merit to receive. Your today's money
is worth a lot, compounded to the future. Much more than you'd probably be
receiving if you proceeded the way you're investing at present.
Please read the FAQ for more