This website is free, costs you nothing for entertainment and enjoyment… and yet you still complain about the content of the posts.

Seriously, what is your problem?

A bunch of consumers got in over there heads on loans they couldn’t pay, a bunch of investors invented an products and lied about their quality and then it all fell apart. The feds lowered interest rates to try to encourage growth and here we sit.. it’s not this website’s fault, but the people that are hurting the most could benefit from this post. Compound interest cuts both ways, assets and liabilities. Maybe if more people understood they would have been able to make their loan payments and interest rates would be higher right now.

Within the universe of stocks, there are quite a few that offer relatively high and relatively reliable dividends that make up for quite a bit of the risk, given today’s interest rates.

If you invest in a stock that pays a reliable and attractive dividend yield at its current price, as long as the dividend amount is kept stable over the long term (or rises), you can afford to lose a lot in the stock price as long as you don’t need to sell and you’re investing for income.

For example, if I am investing in order to generate $500 a year in income over the long term, investing $10,000 in a stock that costs $100 a share and pays $5 a year in dividends is equivalent to investing $50,000 in a 1% CD. They both generate $500 a year. And as long as the stock continues to pay a dividend of $5 a year per share, it is pretty trivial if the stock price drops to $80 – as long as you don’t need to sell.

At 20 years of 1 percent interest your 1000 dollars will have grown to 1220, no 2653. The only thing more sobering than that fact is not keeping your cash in ANY interest bearing account.

Nothing can expand exponentially forever, not at 5% or even at 1% growth each year. That is mathematically impossible. Everyone would be millionaires without a lick of work, that is impossible as well. Money can not be created out of nothing without making the existing cash worth less.

The past 60 years do not reflect reality, it has been a giant bubble and the American economic engine is sputtering into a slow and painful deflation. Zero interest is the new normal and the Fed will not raise interest rates for a very long time. One lost decade becomes two lost decades becomes a lifetime.

“Interest” is what nothing more than the cost to borrow money. That’s savings accounts, money market funds, CD’s, bonds – any “loan” instrument. That’s it.

Capital gains made from owning stock, mutual funds, and other equity instruments produce a “rate of return.”

“Compound interest” has nothing to do with the stock market. That’s a compounded “rate of return,” and it’s not nearly as simple. You have to specifically re-invest dividends. Straight-up capital gains is not a “compounded rate of return,” it’s simple appreciation.

Confusing the terms like this is one of the reasons everybody is so surprised to learn that the “magic of compound interest” isn’t nearly as magical as was advertised, particularly over the past decade or so.

I mean, if you *have* a specific goal, than by all means, saving for it is fantastic.

But I think it’s just as important to save for the goals you don’t yet know about – the things that you might want to do in 10 years that you can’t even imagine you’d want to do now.

(Heck, even in this example, he talks about the seeds of his now-success were planted 14 years ago … but the Trent he describes from that time doesn’t share the same values or goals that he has now, it wasn’t until his ‘wake-up-call’ with his first child that he shifted)

Enjoy life now. Save so that you can continue to enjoy life in the future. Re-evaluate yourself and move forward.

Anyway, “the banks” generally don’t have the power to print money, which is the only way real inflation can take place – when new money outstrips new productivity. The federal government figured out a long time ago that if money supply growth could be detached from limitations such as the gold standard, it could secretly increase taxes without taking the political heat, and could do something the Constitution doesn’t expressly allow, namely, tax wealth instead of just income.

I put the term “the banks” in quotes, since I’m talking here about banks like Chase, Bank of America, etc. There is one bank, of course, that must collude with the federal government to implement the inflation tax, namely, the Federal Reserve Bank.