Game Changer: Investing

In my mind, investing is something that can help you and your family never have to work another day in their lives.  For me this is a huge game changer.

Being born with wealth is like starting a game of Monopoly with property, extra money, and if you're dad is the owner of some big company, it's like you've already built big beautiful hotels on your property.  This is completely insane and unfair if you think about it.  But life isn't really fair is it?  We're all in a big game of monopoly, and we're actually all doing pretty well (read my last post "Perspective.")  Being born into a middle class family in the US is like collecting lots of money when we pass go, relative to someone born in a 3rd world country.  My family and I are doing very, very well compared to the rest of the world.  Now I'm saying we can do much better if we bought property, just like in the game Monopoly.  **I'm totally not saying money should be the goal in life, that's absolutely not what I'm saying.  Just making an analogy right here.

To help quantify this "much better", the US S&P 500 has grown at something like 10% a year for the past 100 yrs, and if you consider about 3% inflation, you can grow your purchasing power by investing in the market by 7% a year.  That means every 10 yrs you can double your purchasing power.  In your 70 yr lifetime, you can grow your purchasing power by 2^7 or 128x.  For the same amount of money you use to purchase a car when you're born, invested correctly, you'll be able to buy 128 cars.  Okay so there's taxes, maybe the US growth rate will be lower in the future or whatever, but the point remains.  Investing over a long period of time can put your family out of the middle class.  This is the benefit of owning a profit generating asset.  Owning stock is like owning part of a business and will make you rich over time.

An interesting experiment I heard from my high school AP Psych teacher, if you give a 4 yr old the opportunity to choose from an Oreo cookie now or 2 Oreos tomorrow and he chooses 2 Oreos tomorrow, he'll be more likely to become an intelligent man.  Well we all have a very similar situation in front of us right now.