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How To Make Money Fast, Slowly.

Did the title of this post cause a double take perhaps? What on earth could that mean, “how to make money fast, slowly.”

Allow me to explain.

The other day I made $16,000 in about 5 minutes. I did this using a small pile of money I had meticulously set aside week after week ($1,000), my smartphone, and an internet connection.

What I did required no formal training. It was incredibly easy.

I made $16,000…..and I’ll see it in about 30 years from now.

Huh?

Who’s Crazy? The One Who Invests? Or Maybe…

“Ay there’s the rub, Broadway Joe! I knew there’d be a catch!”

Perchance to dream, dear reader. Dream with me.

So what am I talking about exactly? How did I make $16,000 and why’s it going to take 30 years for me to see it?

I invested that $1,000 in an index fund.

So what does that mean?

Well if history is any indicator (hint: it is), that index fund is going to go up on average ~10% every year. Let me be clear, it’s going to go up, and it’s going to go down over the years- but it will, on average over the long term, go up ~10% every year.

You might be thinking, “Well wait a minute, 10% of $1,000 is only $100. And $100 every year for 20 years only equals $2,000. Are you lying to me Broadway Joe?!”

But don’t forget about Compound Interest my friends.

As Albert Einstein once said, “Compound Interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays for it.”

When first I appear, I seem deleterious, but when explained, I’m nothing serious!

We should all listen to this guy with his tongue out.

Want to know how to make money fast, slowly? Compound interest is going to be your best friend.

Let’s go back to that initial $1,000. After one year and an average ~10% return, yes it’s going to be about $1,100.

What happens after another year?

Now $1,100 is going to grow by another ~10% or $110 (note: $10 more than last year), giving you $1,210 at the end of year two.

The gains in the early years are going to be smaller, but imagine way down the line (tens of years) how powerful that could be!

You don’t even need to imagine, I’ll drop a graph right here for you outlining what it looks like.

how to make money fast

As you see compound interest works its magic year after year, and all of sudden this little $1,000 investment isn’t so little anymore at the end of 30 years.

This is the simple path to wealth my friends. The person “who understands it, earns it.”

If (you make a choice) / Then (you understand the cost?)

Now that we’ve spent some time talking about how to make money fast, slowly, let’s consider how to lose money fast, slowly. (Well really just fast, fast).

On this blog we’ve previously gone into detail about what it means to be investing vs trading. We are investors. We want to invest for the long term, and enjoy all the magic that a simple index fund investment strategy can yield.

In economics there is a widely used term called “opportunity cost”. In short opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen.

Let’s use an example. Let’s say you have the opportunity to work a four hour gig that is going to pay you $100. You also have a group of friends headed to the local bar that evening and they want you to tag along. You deny the gig and go to the bar, spending $25 on drinks (or single drink if you live in NYC). Total spend for the evening: $25.

Well in the eyes of an economist, there’s also a missed opportunity cost here.

Yes those drinks only cost $25, but what about the missed opportunity of earning that $100 instead?

One way to look at this situation, is those drinks actually cost you $125.

So how does this apply to compound interest and investing?

The same is true in the stock market. If you choose to ignore the tried and true index fund strategy, and instead go after flashy stocks! meme stocks! etc. you are losing out on the opportunity of steady and sustained accumulation of wealth.

For instance Netflix has been one of the fastest growing stocks for nearly a decade, with investors piling on to ride the growth year after year. And then from last November to now, the company’s stock has lost about ~70% of its value. That’s how you lose money fast, fast.

Finale Thoughts

I hope at the end of this post you have a pretty clear direction of where we’re headed.

If there’s an investment strategy out there that has proven decade after decade that investors can expect an average return, while reaping all the benefits of compound interest along the way, why not pursue that path?

Not to mention the average return of the market over time tends to consistently beat pretty much every professional and active trader working in the finance sector.

How to make money fast, slowly? Make it easy. Keep it simple.

I’ve said it here before and I’ll say it again, you can become a millionaire. But it’s not going to happen overnight. It’s going to happen over many nights, and years.

Let’s go back to the beginning of the post. I took $1,000, and turned it into $16,000 in about five minutes.

I won’t see that $16,000 for a long time, but that’s ok. That’s when I’m going to need it most.

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