Route 2 FI - Free As A Bird #15 | The 17 Laws Of Investing

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Hi everybody! Welcome to the 15th edition of my newsletter "Free As A Bird".

Today is my birthday.

I’m 32 now.

Would you be interested in reading the 32 Lessons I’ve Learned By My 32 Years?

Thinking about eventually making a blog post about it.

My Fascination For Compound Interest

As I told you in the last newsletter I’ve been thinking about stop pursuing FI, and rather focus on my goal on becoming a private investor.

The RE-part in FIRE just don’t feel right.

I love to work when it’s on my premises.

Yesterday I played around with the numbers.

I’ve assumed 10% interest rate (before inflation), $3,400 invested every month and $212,000 invested (I assume this portfolio value by the end of 2019).

I’m really fascinated by compound interest and the wealth snowball.

  • In 2020 my index fund portfolio will raise by $64,922 (40,800 is deposit and $24,122 is interest).

  • In 2021 my index fund portfolio will raise by $71,720 (40,800 is deposit and $30,920 is interest).

  • In 2022 my index fund portfolio will raise by $79,230 (40,800 is deposit and $38,430 is interest).

And then in 2023 the interest will finally beat the $40,800 I plan to deposit.

How sick is that? Over 50% of my portfolio increase comes from me doing nothing.

In 2026 I’ll receive $77,000 even if I end up working 0 hours.

In 2029 my portfolio increases by almost $160K. And at that time I’m only 41 years old.

These numbers continue to blow my mind.

What if I continue to invest these sums until I’m 60 years old?

Almost $10 million!

Just a thought experiment.

Have you played around with financial freedom numbers?

Feel free to share your story.

An Interesting Thing I Read This Week That Got Me Thinking

The Laws Of Investing by Morgan Housel (Reading time: 19 minutes)

It’s a 19-minute gem!

Here’s a piece in the text which he makes a really good point:

“Well-meaning financial advisors will speak to 23-year-olds and say, “You’re so lucky, you have 45 years before retirement.

Compounding can grow your money 20-fold during that time.” The confused and realistic 23-year-old will reply, “That’s neat, I make $16 an hour and have $58,000 in student loans.”

By the time that student’s career has taken off and they have substantial cash flow to invest they’re usually in their 40s or 50s, when the power of compounding has diminished by perhaps 90%, tempting them to take more risk to meet their goals.”

How many times haven’t you heard someone say on Twitter: “You’re only 20 years, you’ve got 50 years of compounding returns in front of you”.

I feel Morgan kills that myth pretty good in his quote above!

Unless you’re some kind of multi-millionaire when you’re that young of course ;)

Recently I’ve started reading all the texts that Morgan has ever written from back in The Motley Fool’s days, he’s writing is simply brilliant.

You can view all his writings here:

Morgan Housel - "The Motley Fool"

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Quote that got me thinking

How often do you make changes to your portfolio?

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Thanks for reading,

Route 2 FI