Financial insights can come from anywhere -- even an animated TV series like Futurama.
The other day, I was watching an episode entitled "A Fishful of Dollars." The series' hero, Philip J. Fry, was a pizza delivery boy who got cryogenically frozen in 2000 and woke up a thousand years later. In this episode, he runs out of money, but remembers that he had a bank account in his 20th-century life. As he recalls, it never had much in it, but hey, any sum will do, since he needs some cash.
Is his bank account still available to him? Well, this is TV, so of course it is -- and lo and behold, it has been compounding interest for a thousand years. Fry's bank account had just 93 cents in it when he was frozen, compounding at an average interest rate of 2.25%. A thousand years later, he suddenly finds that he's worth $4.3 billion.
There are some lessons here for all of us. For starters, behold the amazing power of compounding. Most of us don't have a thousand years in which to grow our money (well, we may, for our descendents' benefit). But we also probably have a lot more than 93 cents in our accounts. If you let $5,000 compound at 2.25% for a mere 25 years, you'll end up with $8,721!
What? That's not terribly exciting? Well, it shouldn't be, since inflation would likely make that worth less than $5,000 in today's dollars. Fortunately, you can do better than that.
Fry took 1,000 years to become a billionaire. You could have done that in just a few decades, if you'd invested around $100,000 in Warren Buffett's company Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) back in the '60s. Or if you'd started with around $3 million in Microsoft (NASDAQ:MSFT) 20 years ago. Or if you'd plunked just a million dollars into Wal-Mart (NYSE:WMT) back in 1972.
But of course, hindsight is 20/20, right? Who knew back then that these companies would do quite this well? You might have put great faith in Pan Am or Montgomery Ward or Woolworths back then, and it wouldn't have seemed crazy at the time. That's one big reason why diversification is important.
Chin up, though -- all is not lost. Odds are, you probably won't become a billionaire in your lifetime -- especially if you're not already a millionaire right now. But you can still line up a comfortable retirement for yourself, by planning and investing well. We'd love to help you, via our Rule Your Retirement newsletter, which happens to be the retirement guidance source that I refer to most often and which you can try for free.
Here's a sampling of some very useful articles from past issues:
- In the June 2006 issue, newsletter editor Robert Brokamp addressed international investing, re-recommending an international mutual fund that advanced some 50% since he first mentioned it back in December of 2004.
- In another issue, Robert explained why we may want to plan on withdrawing 4% from our nest eggs each year, in retirement, if we want to make the money last.
- The October 2005 issue delved into dividends and offered some recommended dividend payers. (Robert also discussed dividends in this article, mentioning firms such as Johnson & Johnson (NYSE:JNJ), 3M (NYSE:MMM), and Procter & Gamble (NYSE:PG).
These articles may also be of interest:
- Can You Retire in 2016?
- Prepare for a Gruesome Retirement
- $1 Million May Not Be Enough
- 9 Retirement Killers
Microsoft, 3M, and Wal-Mart are all Motley Fool Inside Value recommendations. Johnson & Johnson is aMotley Fool Income Investorselection. Whatever your investing style, the Fool has a newsletter for you -- and a 30-day free trial to match.
Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, Microsoft, and Berkshire Hathaway. The Fool has a disclosure policy.
