What is the 10% compounding theory?
First I’ll give you an example. When investing in a retirement account, lets say you put 10k into a 401k or a Roth IRA account. Lets also say that over a given period of 20 years, if you contribute 2k annually, with a nice 5% return annually, over the course of 20 years that 10k could be potentially 95,971.48! Not bad for a 10k investment wouldn’t you agree! Many investment advisors use examples such as ones like I just mentioned to get people to investment in the markets for individuals retirement. How does 10k with a annual 2k contribution turn into almost 100k in 20 years? Well it’s the compounding interest theory!
By definition, it is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously-accumulated interest. That is how 10k turns into almost 100k in 20 years’ time frame. Now, here comes the twist. What if you applied this same principle using the number in years as the number of successful trades in the stock market with the same amount of initial funds, and the same amount contributed annually to your personal investment account. For example, you have 10 successful trades a year, with each trade netting you 5% each trade. Now you’ve just accomplished 20 years of work in just 2 years! NOW do I have your attention?!
There’s a saying, “How do you eat an elephant, one bite at a time” translating to the investment world, “How do achieve substantial capital for retirement, one successful investment at a time!” Essentially what people need to realize is the road to a great financial future can be achieved using some of the same principles that have worked for years, however applying them to suite your needs. With the stocks that are provided at Seeking Value Investor, this very same goal can be achieved by investing in the recommended stocks we provide and with a little time and patience, before you know it, you’ve eaten that ENTIRE ELEPHANT (YOUR retirement goal) in the room, one bite at a time!
There are literally hundreds of stocks that move 5% within a month’s time, and that’s being conservative. Let’s bump things up a notch, and apply the same principle however this time, let’s look for a 10% return instead of the 5% return used in the example. The stocks that are provided to here will have the ability to net you a 10% at the very least! Everyone’s investment risk tolerance is different, however this is a principle that can work for the aggressive investor or the passive investor. In the end, you both reach your destinations in almost less than half the time you originally planned for. This does not take into account the tax implications that are involved with whichever account you choose to use for your investing, so we recommend that you contact a tax professional for more information pertaining that subject.
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