How much you can earn from $10000 within a century?

Since the market is rather boring at the moment, I thought to share with you something important for long term investment.

If your grandpa left you $10000 80 years ago, how much you would have gained from it now? Well, it all depends on how the money was managed, if not wasted along the way. If it had just been left alone and forgot about, you would still have $10000, no penny less than that nominal value but your buying power would have already lost 90%+ in this less than 100 years period. This is called inflation effect and your money’s true value has been inflated away over time. That’s why it is critically important to not just leave your money alone. Even though you always hear “Cash is King”, it is only a wisdom at certain period of time like now. Over time, cash is dumb!

So let’s say your parents were very smart and invested this $10000 for you for the past 80 years. There are two ways of investing: The first was just for growth. Let’s make it easy. Your $10000 was invested in the S&P 500 index for all these years. By 2018, your wealth from this $10000 would have become $431,397! Wow, congratulation. What a great return, right?!! Before you get too excited, see what comes next! How about the same investment for the same time period but you get a return to $2.5 million? Sounds impossible, right? But that’s what is really possible although not many people are willing to believe and are interested to do so! If you have followed me for a while, this is really nothing that should be surprising to you. The very simple but super powerful wealth building strategy is the dividend reinvestment (DRIP) to benefit from the most efficient and safest money making approach via compounding, the world 8^th wonder per Einstein. See the chart below based on the analysis by the Hartford Funds. No need to say, this is something I’m totally convinced and have already implemented with my own money for years. Sure you can do all the fancy trading, but for me, trading is more of a fun to keep myself with enough sanity and sharpness in mind. For the real wealth building for retirement?  Nothing more than DRIP and my unique cash-rich life insurance. To me, nothing has been more safe and powerful than these two, both of which are relying on the magic compounding effect. Literally, both will generate sufficient retirement income for me and my wife while I’m just sleeping. Not much additional work is needed as long as they are set up appropriately and safely.