Saturday, March 8, 2008

finance is fun

Who said finance is boring? What is boring is to have bad finances. Only financially successful teens and adults can have real fun. Let us face it more and more things that we call "fun" need to be payed with the hard and cold cash. Now that we established the necessity of financial well being, we can proceed with basics.
Starting early in saving and investing is the key for future fortunes. While it is known that Markets can experience short term blahs, the longer term uptrend is totally indisputable. That is the reason that money invested at the teen age is guaranteed to build into fortune, but money invested at the age of 40's and 50's is not.
Einstein called the compounding the eight wonder of the world, why? because, while the teen grows to adulthood, in the 42 or so years, even a small amount invested will turn into millions. Let us take an example. At the age of 15 teen invests $5000. For 42 years the money yields 10% compounded return. By the rule of 72 this money will double every 7 years(72/10 = 7). For 42 years it would have doubled 6 times. So, at the age of 57 the teen now adult, would have 5000*2**6=5000*64=320000, which is in detail growth..

5000+5000=10000
10000+10000=20000
20000+20000=40000
40000+40000=80000
80000+80000=160000
160000+160000=320000

Into $320000(almost half a million Dollars) thousand dollars, without any further time and money investment! Einstein was right.
If this is not amazing and fun, then I do not know what it is? to see this money growth, instills even more discipline in human beings to stay the course and additional moneys saved adds and grows the nest egg even faster. I would like you to understand these principles. It will make you rich and confident. Would like to hear your comments very much.

12 comments:

john said...

Hello Julie,

I am giving your blog address to my two God children who ( hopefully) will try to learn about personal finances.

old john

Julie said...

Hello John,
I would be glad to speak to two the kids and share expereicnes. Sorry for being late. I work and study and will not always be able to respond to the posts fast.

Thanks
Julie

Sharon said...

Julie

Very nice initiative.

good luck

Sharon

Julie said...

Sharon,
Thank you.
I hope to help kids all over the world to appreciate the importance of time. I am sure there will be many who will enjoy this information at the early age. I have a dream to be one of the personalities that has saved and bettered many lives by catching them early in the development.

I ask all of the teenagers to tell their stories, pose their questions to someone of their own, as they may feel intimidated discussing financial issues with adults.

Julie

Greenie said...

Dear Julie,

Nice blog that I got directed through Boris. Could I ask you a question?

"While it is known that Markets can experience short term blahs, the longer term uptrend is totally indisputable."

What makes you think that the future will look like the past? If you look in the past of American history, the smartest people like Edison or Henry Ford were busy building things that improved the lives of people. Today's smart people like you or your dad are busy in speculation, which is zero-sum for the society (i.e. you win at the cost of others). Who will build products that will guarantee your long term return?

Good luck,
G.

Julie said...

Hello Greenie,
Excellent Question.
Requires me to have a bit more time, than I have now, running to school.
Will answer you later today.
Julie

aaaaaaum said...

Dear Greenie, the SMART people of this world thrive at multi-tasking and are able to produce results that benefit this world at the same time they make money.

Dear Julie, I will let my nephews and niece know about your blog.

Best wishes!

brandon said...

Hi Julie,

I'm happy to see you follow your Dad's example.

I agree with you, that being consistent and hopeful about the future is best course in the long run.

I would add, that sometimes it is to your advantage to be 'short' sometimes. The educated and free-thinkers should be able to follow your 7 year rule.

I've been reading a book called 'Pop!'; about bubbles.
I've got thru the USA expansion in telegraphs, railroads, Sec Act of 1933 & 1934 (b/c 1929 market crash), and the internet; all of which were bubbles.

The book argues that humans and the US's free-market allowed such bubbles to happen. These bubbles didn't exist to the same extent in Europe and other centrally controlled economies.

Now, the early investors got wiped out; because there was no economic sense to early telegraphs, railroads, fradulant stocks, and the internet.

The book argues that many foreign investors bought into the US during all the centuries. Only to get cleaned out by being an early investor. Think about the current sub-prime; banks around the world are writing off US house mortgages debt.

What will be left? Alot of cheap (in relation) houses in the US market, thanks to world investors.
What was left after the telegraph bubble; yes, tons of useful lines that would help the economy in many different ways in the decades ahead. The railroads left cheap transportation in the decades ahead. So on.


I'm not making a comment one way or the other.

Just contributing. Wish you well in your blog and your school.

Brandon

Julie said...

Hello Greenie,
Please forgive me being late, but now I am ready to answer.

I learned from my own family that "everybody is an investor"

Which I guess means that any decision about money has a part gambling and part investment aspect. Even if one keep the money in the refrigerator(now you know :-) that amounts to speculation. Why in the refrigerator and not in the bank or at mothers home? In what currency? Dollar, Pound or Gold? So, it seems like even the simplest act of keeping cash is a speculation.
Interesting is not it?
I hope you will agree that we are all speculators. The only question is how do we understand the risk. It is that knowledge that separates the speculator from investor in my opinion.
So, I do not see my father being a speculator. He just seems to do his best to get maximum out of his investments. Keeping the risk to the minimum seems to occupy his mind.

About the future. I do not know what future brings, but looking at the past savers seem to have done well. Saving things, especially food is what allowed humans to survive where animals could not. Staying worm was another thing. Nowadays we must pay for these. So, what are we to do? Of course, we need to save money as that will allow us to pay for energy and food. I hope that you agree about saving being good.
I believe the only real question left to answer is related to the 10% return in the market.
I am afraid, I do not know that stock market will return 10% next 50 years. The only clear statement I can make is that whatever the return it would have been worth it, as the alternative is mindless consumption.
About USA not producing things, I agree. At the same time CHINA, INDIA and others are producing and exporting and we are able to invest internationally to take advantage of that.

It is my pleasure to answer this question as I had bit more than usual to think about it.
Thank you.
Your Julie.

Julie said...

Dear Aaaaaaum,
It would love to communicate with your nephews and niece. Thank you very much
Your Julie

Julie said...

Hello Brandon,
You are discussing history, with which I am not very familiar at this stage. So, I asked my father about those and then thought about it. Here is what I got out of it.
People need incentive to do things. Hungry person will look for food. And Cold will cause him/her to look for shelter. Once basic needs are met then additional drive is needed to cause the action. Better car than the friend has, could be a strong motivation for some. Same could be for nice boyfriend or girlfriend. These and similar feelings are powerful drivers and they get mixed in with fear and greed to create a very complex motivational system for individuals. The motivation then causes actions and often the results are not predictable, but when we collectively try to go after similar goals then the predictability comes in. My father gave me an example of EINSTEIN BOOS theory about particles. As it turns out, they too, behave in interesting ways that is not characteristic of each one of them. So, I guess traders call this "herd mentality".
I believe herd mentality explains a lot of the things you talk about. There is a lot I need to learn in this area. Thanks for giving me "incentive" Brandon.
Your Julie

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