Hello! I’m Mamish!
Continuing from last time, as a total beginner stay-at-home investor, I’d like to share a few things I’ve learned (without holding back, haha).
Money makes money
This is quite sudden,
The big money is not in the buying and the selling, but in the waiting.
— Charlie Munger, Berkshire Hathaway
You might be wondering, “Who is Charlie Munger?” Well, it turns out he partnered with Warren Buffett, who is known as the ‘God of Investing.’
I’m sure many of you have at least heard of Warren Buffett.
Warren Buffett(left) and Charlie Munger(right)
Munger’s quote suggests that people who constantly buy and sell may not ultimately make large profits.
He emphasizes how powerful compound interest can be.
Continuity makes big money
My partner watches Felix, a YouTube channel of a European investor, every day, and it seems that Felix also says the same thing.
By continuing to invest over the long span of 10, 20, or even 30 years, your money starts making more money through the power of compound interest.
According to his data, the interest rate is around 11%! Is that really true!?
There was a time when Japan’s postal savings had high interest rates of 6%, but that’s now a thing of the past. Poof! ☝☝
However, when I think about 20 or 30 years from now… considering my age…
In 20 years, I’ll just barely still be alive, maybe…
So, Felix recommends starting investing as early as possible.
This graph is a screenshot from Felix’s YouTube video. (Sorry if it’s a bit hard to read! 💦)
The red bar chart shows that if you hypothetically invest $700 every month, your annual investment would be $8,400, representing the same investment made continuously over 20 years.
What’s interesting is the green part, right?
According to him, assuming an average dividend yield of 11%, in the first year, you’d get $924 in dividends based on $8,400 × 11%.
So, $8,400 + $924 = $9,324 ($8,400 × 111% = $9,324).
If the dividends are reinvested, in the second year, the amount becomes ($9,324 + $8,400) × 111% = $19,673.
In the same way, if the dividends (annual contributions + dividends) continue to be reinvested at an 11% yield, the total would amount to around $437,947 in 20 years.
Simply saving $700 monthly for 20 years would give you $168,000.
Investing the same amount instead could lead to approximately $438,000.
That’s a big difference!
Roughly $270,000 would just come in on its own, so to speak.
But…
If you can invest $700 every month, perhaps you wouldn’t struggle financially in the first place…maybe
In any case, Felix’s idea is to start as soon as possible, even with small amounts!
What are dividends?
In simple terms, dividends are “a portion of a company’s profits returned to shareholders.”
Shareholders buy company stocks to support the company’s management and receive part of the profits in return if the company does well.
Dividends are usually set on a per-share basis.
The frequency of dividend payouts varies by company, sometimes occurring monthly, quarterly, semi-annually, or annually.
Dividend yields also vary based on a company’s performance.
Some yields are around 3%, others at 11%, and some high-yield companies even exceed 20%! Wow! (ﾟﾛﾟ*)(ﾟﾛﾟ*)
Companies with good dividend yields include well-known names like Johnson & Johnson (JNJ) and PepsiCo (PEP).
The 11% figure Felix mentions likely reflects an average yield across investments in various companies.
Naturally, he’s considering it as an average over a long period, keeping the potential for downturns in mind.
Today’s Takeaway
Today, I shared a bit of what I learned about compound interest and dividends.
If you’re even slightly interested in investing, maybe give it a try.
In these uncertain times, even profitable companies today may face challenges tomorrow.
So, if you’re the type to say, “I’m totally dedicated to Apple alone ♡,” be cautious!
An unexpected heartbreak could be in the cards.˚‧º·(˚ ˃̣̣̥⌓˂̣̣̥ )‧º·˚
But with investing, it’s okay to play the field a little!
I’ll keep sharing bits of what I learn along the way with you all.
Bye, for now👋
