X-Message-Number: 4855
From: 
Date: Thu, 7 Sep 1995 21:58:25 -0500
Subject: Money matters

Well, of course money matters, you say, after reading the subject line.  But 
since Mike Darwin listed so many varied ways in which godawful amounts of 
money have been "invested" wisely or foolishly, I thought I'd make a few 
notes.

1. Saving 10% of your income each month for 100 years can create a tremendous 
amount of accumulated wealth, even at 3% interest.  If you enjoy playing with 
spreadsheets, set that one up.  Start with whatever you're making now, adjust 
your income upwards at whatever rate you think is rational, keep a line of 
what you are adding to savings, and keep track of accumulated savings and 
interest.  You may be startled what your commitment to longevity can do for 
your personal wealth.

2. Double digit return on investment is really quite common in a variety of 
managed securities activities.  I have a very reputable money manager who is 
based in Austin who manages about $10 million of assets for various 
individuals.  He requires $50,000 as the minimum amount he'll manage for you, 
but as Mike points out, quite a few of us play at the level where $50K is 
available for investment purposes.  Paul, my Austin contact, gets between 20% 
and 28% annual return, using a variety of carefully hedged investment 
mechanisms involving mostly bonds and stock index derivatives.  Such 
approaches are fiscally conservative and successful year after year.  (Paul 
hasn't had a down year in the last 10.  In 1987, when the stock market 
plunged, funds under his management earned 18% return.)

3. If you take the first spreadsheet I described above and, after saving up 
$20,000, take half that amount and place it in a higher interest rate 
certificate of deposit or mutual fund, earning between 5% and 10%, you see a 
tremendous improvement of your standing after 100 years.  Then, when you've 
accumulated $100K, take half of that and place it with a money manager who can 
keep it growing at 20% per year.  You'll soon see your situation improving 
markedly.

Of course, it is very hard to treat the money you are saving as a completely 
independent fund, not to be spent in principle nor in interest.  But with a 
little discipline, you can see how spending 90% of what you are spending today 
will go just about as far.  And the end result can be staggering.

Go ahead, work it out.  In a few days I'll post my initial conditions and my 
100th year results.

Jim
http://www.phoenix.net/~medical/


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