Is the compound interest calculation in the book problematic or am I missing something?

[goku000]

Hey all,

I am reading The Millionaire Fastlane book and I have a question with regards to the calculation in Slowlane section.

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

In his calculation he reaches this number using $10,000 investment and no other monthly or annual contribution. From what I read in other investment books, the general advice is to regularly invest. Noone I knkw suggests putting $10K and never investing again.

With this in mind, if you have $10K and you invest $500 every month you should have $13,353,177.31

Can anyone explain why he ignores the monthly contribution?

 

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[Nightwolf]

Hey all,

I am reading The Millionaire Fastlane book and I have a question with regards to the calculation in Slowlane section.

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

In his calculation he reaches this number using $10,000 investment and no other monthly or annual contribution. From what I read in other investment books, the general advice is to regularly invest. Noone I knkw suggests putting $10K and never investing again.

With this in mind, if you have $10K and you invest $500 every month you should have $13,353,177.31

Can anyone explain why he ignores the monthly contribution?

The point he was making here is that "gurus" preach you to put your $10k in a low ROI fund and then wait for 40 YEARS and be rich in your "twilight years" instead of investing it into building a business which will have a way higher ROI ( which he calculates later in the book).

He was pointing out what you SHOULDN'T do.

You wanna invest $500 every month and then wait 40 years for that 13 mil? Sure go ahead.
We'd rather invest it into our businesses and retire within a decade (at most).

I advice you to adopt the mindset that the book conveys instead of pointing out a "calculation error" because he didn't consider $500 monthly investments.

 

[goku000]

The point he was making here is that "gurus" preach you to put your $10k in a low ROI fund and then wait for 40 YEARS and be rich in your "twilight years" instead of investing it into building a business which will have a way higher ROI ( which he calculates later in the book).

He was pointing out what you SHOULDN'T do.

You wanna invest $500 every month and then wait 40 years for that 13 mil? Sure go ahead.
We'd rather invest it into our businesses and retire within a decade (at most).

I advice you to adopt the mindset that the book conveys instead of pointing out a "calculation error" because he didn't consider $500 monthly investments.

I understand that later he explains the Fastlane approach which has higher return. I don't have problem with that. I also understand the chapter is about what you SHOULDN'T do. My question is with his reasoning of the Why you shouldn't do it.

No need to be defensive. I'm here to learn. I understand the Fastlane approach has higher return in quicker time. But this doesn't mean we should treat all other options as trash and ignore the calculation errors, if there is any.

If there is any "guru" out there telling you to invest 10,000$ once and not contribute again; he is not a guru but an idiot. The general advice is to start investing early and regularly.

 

[Subsonic]

Hey all,

I am reading The Millionaire Fastlane book and I have a question with regards to the calculation in Slowlane section.

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

In his calculation he reaches this number using $10,000 investment and no other monthly or annual contribution. From what I read in other investment books, the general advice is to regularly invest. Noone I knkw suggests putting $10K and never investing again.

With this in mind, if you have $10K and you invest $500 every month you should have $13,353,177.31

Can anyone explain why he ignores the monthly contribution?

The point of that idea is that 15% annual returns over 40 years are not going to happen. A good year for the s&p500 is 10%. The return one can calculate with if they have a HIGH risk tolerance is 8% a year.

10k invested and then 500 per month with 8% returns over 40 years leads to this.

The guru is giving the promise that with his course or fund you can make 15% a year.
Having 1.7 or even 3 million in 40 years is just a shit deal.
Yeah sure if you could get 15% a year returns you can live off 1 million like a millionair.
However there is a reason why most people here calculate 5% returns for their investments in the paycheck portfolio.

 

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[Kevin88660]

Hey all,

I am reading The Millionaire Fastlane book and I have a question with regards to the calculation in Slowlane section.

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

In his calculation he reaches this number using $10,000 investment and no other monthly or annual contribution. From what I read in other investment books, the general advice is to regularly invest. Noone I knkw suggests putting $10K and never investing again.

With this in mind, if you have $10K and you invest $500 every month you should have $13,353,177.31

Can anyone explain why he ignores the monthly contribution?

15 percent is too optimistic.

Compound interest magic only works at the last end of the curve.

It helps big money to grow bigger. But it takes almost forever for a small amount of money to grow big.

Warren buffet makes more than 95 percent of his money after age of 65.

Of course he reached millionaire stage real early also. But it has little to do with compound interest.

Compound interest will never solve any of your near term 5-15 year's financial goals.

 

[Guest-5ty5s4]

Hey all,

I am reading The Millionaire Fastlane book and I have a question with regards to the calculation in Slowlane section.

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

In his calculation he reaches this number using $10,000 investment and no other monthly or annual contribution. From what I read in other investment books, the general advice is to regularly invest. Noone I knkw suggests putting $10K and never investing again.

With this in mind, if you have $10K and you invest $500 every month you should have $13,353,177.31

Can anyone explain why he ignores the monthly contribution?

The point is that whether you have 2.5 million or 13.3 million DOES NOT MAKE A DIFFERENCE AT ALL if you are dead or in a nursing home.

Yes, it is good for your kids and your family.

No, it does not make YOU, yourself, the person you are, in the body you have right now, rich.

The entire point of the book is to explain how real life rich people get that way and that they actually do exist and to dispel the myth that all of them got there by playing the Wall St. game and watching CNBC.

Entrepreneurs have existed long before Jim Cramer has, and long before index funds have.

 

[MJ DeMarco]

You're missing the point. The point isn't the calculation (either lump sum or regular contributions), the point is the amount of time that needs to pass, and that your mortality is a far more important # than "Save $500 a month."

The other point is to convey that the Slowlane orthodoxy, better known as "buy and hold" is actually, "buy and die".

How to learn every personal finance book ever written in less than 3 minutes. And what you should be doing instead.

How to learn every personal finance book ever written in less than 3 minutes. And what you should be doing instead.

www.themillionairefastlane.com

"A Slowlane guru preaches that a $10,000 investment grown at 15% will be worth over $2.5 million in 40 years!!!"

This statement was actually taken from an article I read at that time which was applauding the concept of compound interest. I didn't make it up.

 

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