A quick review of compoundingWhat happens to $1 million over 10 years in different return scenarios? At 4% annually it grows to $1,480,244 and at 8% it grows to $2,158,925. Over 20 years those numbers are $2,191,123 and $4,660,957 respectively. All well and good, but using today’s 2.4% 10-year Treasury note, that $1mm becomes $1,267,650 and $1,606,938 respectively. In addition, bonds lose value as rates rise, so a bond holder risks taking a loss if he/she needs to sell before maturity. Either way, bond buyers face a dilemma, and I think a well-researched and carefully constructed equity portfolio has a far better chance of success for the next 10 years from today’s levels, despite the inevitable bumps that will happen.
Conclusion: I live in an equities world, and I recommend any serious investor consider the benefits of doing so too.Disclaimer: All investments involve risk and various investment strategies will not always be profitable. Neither the information nor any opinions expressed constitutes investment advice and is not intended as an endorsement of any specific portfolio manager. Past performance does not guarantee future results.
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