The $2.4M Informed Investor Journey

Our time is our most valuable asset and that is why we are always assessing what the pay-off is for our investment of time into something.  What is the pay-off for going to the gym?  A six pack of abs.  What is the pay-off for going to university?  A great career that provides income and fulfillment.  So, what is the pay-off for investing the time and energy to become an informed investor.  With our ADD (Attention Deficit Disorder) and instant gratification society, it’s hard these days to be motivated to take action on something like investing that we will only start to see the benefits of in 5, 10, 25 or 30 years; but this journey will have a profound impact on your financial freedom.

But words can only motivate us so much, personally I’m a numbers guy!

The pay-off for investing your valuable time in learning about creating wealth is significant, and the earlier you get started the bigger the impact.  Assume two investor versions of yourself depending on whether or not you decide to invest your time – the informed investor and the uniformed investor.  To provide a comparison we will have to make some assumptions:

• Start with $5,000 to invest at age 25
• Contribute $10,000 per year until the age of retirement of 65
• The informed investor version of yourself is able to achieve normal, annualized returns of 8.5% with any gains re-invested
• The uninformed investor version of yourself earns returns of, well the average investor.  According to Blackrock (http://www.businessinsider.com/chart-average-investor-returns-2012-12) this was 2.1% from 1992 to 2011; under-performing most asset classes and inflation by 0.5%. 

That is a $2.4M pay-off for spending some time in expanding your investing knowledge.  Now that's something worth embarking on a journey for.