When I was watching the original Blade last week -- that late-'90s action-thriller where Wesley Snipes takes the kitchen sink to the vampire nation -- I was struck by Blade's comment that vampires were behind a lot of America's finance and real estate operations.
Could that be a shot at finance professionals for being stingy, tight-fisted bloodsuckers? Well, maybe.
I had another theory, though, and it has to do with compounding interest. One of the great things about being a vampire is that as long as you avoid things like stakes, garlic, and getting your head chopped off, you'll pretty much live forever. This means that vampires can take full advantage of the magic of compounding, which Warren Buffett often talks about and which Albert Einstein supposedly referred to as "the most powerful force in the universe."
If a couple of those vamps came over on the Mayflower, got their hands on just a single dollar, and were savvy enough to invest it at an average inflation-adjusted interest rate of 6%, that $1 would be worth $6.2 billion today. Boost the interest rate by a single percentage point and you'd have $235 billion, more than the market cap of Apple (NASDAQ:AAPL) and Merck (NYSE:MRK) combined. If those vamps brought that dollar over on Columbus' ship and got that same 6% real interest rate, they'd now be sitting on a $10.8 trillion war chest -- about equal to the nation's entire gross domestic product.
Where do I sign up?
Alas, that's not very realistic, is it? Of course not. And I'm also not suggesting you go out and try to get yourself bitten by Dracula just so you can own a substantial part of the world 500 years from now. More practically, investors who keep compound interest in mind when making investing decisions can take advantage of this principle without becoming creatures of the night.
Investors with high hopes of quick riches might scoff at a portfolio that returns a paltry 15% per year, but such a portfolio will turn $10,000 into $329,190 over the next 25 years -- even without adding a single penny more. Companies like Moody's (NYSE:MCO) and Marvel Entertainment (NYSE:MVL) have rewarded investors with average annual gains of well more than 15% over the past several years. Of course, to get those returns, you have to let your money compound, rather than springing leaks by being too quick on the trigger and paying out a bunch of money through taxes and brokerage fees.
To get started, you'll need some seed money. You may want to check out what co-advisors Dayana Yochim and Shannon Zimmerman have to say at the Motley Fool Green Light newsletter for some tips that can save you plenty. They'll also tell you what to do once you have the money, by bringing you helpful advice on what investments make the most sense for you.
Fool on!
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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can visit Matt on the Fool's CAPS service here, or check out his CAPS blog here. Moody's and Marvel Entertainment are Stock Advisor recommendations. The Fool's disclosure policy stays up late at night, but is too fond of garlic to be a vampire.
