Summary: What's better than fireworks and barbecue on the Fourth of July? The beauty of compound interest. The Rule Maker portfolio seeks to buy companies that will thrive for a generation or more, not one or two business cycles. Find the lead steers in your favorite industries and let the power of compound interest build wealth slowly.
A July summer eve -- ahhh! -- can you smell it? The sweet aroma of your just-finished barbecue. The subtle scent of chlorine from the swimming pool next door. The slightly pungent, but likable, wafts of fireworks coming from the backyard. The freshness of newly cut grass all around. Thank goodness the market closed early today and is closed altogether tomorrow. These are the days for soaking up life, not worrying about investments.
One of the best aspects of investing in Rule Makers is that these are companies you can count on. They don't need your constant time and attention. Leave the worrying to the managers of these businesses. John Chambers is hard at work making sure Cisco (Nasdaq: CSCO) provides the world with a full array of networking equipment. Tim Koogle's vision for making Yahoo! (Nasdaq: YHOO) a global media network is well on its way. No doubt, Coca-Cola (NYSE: KO) is doing some sweet business in the U.S. of A. tonight! Vacationers this summer won't be out of touch thanks to the Nokia (NYSE: NOK) phone in their pocket. (Have you seen that we now have cell phone pockets showing up in suits and other "digital fashion" attire.)
As we continue to hold our portfolio of Makers in the years ahead, even if our returns only average out to 11% per year (the market's historical average), that'll be 11% after all taxes and fees. Our account is taxable, but we incur almost nothing in the way of taxes by rarely, if ever, selling. Similarly, we suffer literally no fees such as the ones inflicted upon mutual fund shareholders at an average rate of 1.44%.
A net return of 11% may not sound like a whole lot, but multiplying something by 1.11 year after year adds up quickly. At an assumed 11% rate of return and with our $500 monthly savings, our current $50,000 portfolio will grow to more than $788,000 in 20 years. It'll cross the $1 million mark sometime during the 23rd year. And the $2 million level during the 29th year. That's the miracle of compounding your regular savings. Try out our calculator and see how fast your savings can multiply when given enough time.
What's the lesson? Focus more on businesses that are built to last a century at least, and less on stocks that appear temporarily undervalued. Aim to get rich slowly through regular savings, low investment expenses, and the compounding profits of Rule-Making businesses. Focus more on quality of life than quantity in life.
If you're new to our easy-going investment style and it sounds intriguing, you can learn more through our now-updated Rule Maker FAQ. After reading that, if you still have questions, post 'em to our Rule Maker Beginners board, and then next week, I'll answer some of your questions in this space.
Have a safe and happy Fourth of July!
