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Ready to see examples of how your money grows in the stock market? Great!
Let’s talk about how your money can grow! Investing can seem like a big, scary thing, especially if you’re just getting started, and that might be because we were not taught this in school. But trust me, it’s one of the best ways to make your money work for you. If you’ve ever wondered how your money grows when invested in the stock market, you’re in the right place.
Let’s understand investing and break it down with some real-life examples:
What Does It Mean to Invest Your Money?
Let’s go back to the basics—what exactly does it mean to invest your money?
In simple terms, investing is when you put your money into something—like stocks or bonds—with the hope that it will grow over time. Unlike saving, where your money just sits there, investing gives your money a chance to grow without lifting a finger.
Here is a quick history of how investing started:
Investing is not a modern-day thing—it’s been around for centuries! It started in 1602 when the Dutch East India Company became the first publicly traded company by issuing shares to fund their trade expeditions. Does this sound familiar? Companies do this now when they go public, and you buy their company shares. Of course, this was a game-changer back in the day, as it allowed everyday people to invest in something bigger than themselves. It allowed them to grow their money with a little effort.
Fast-forward to May 17th, 1792, when 24 stockbrokers signed the Buttonwood Agreement on Wall Street, marking the birth of what we now know as the New York Stock Exchange. Investing has always been around and has focused on putting your money to work and letting time do the rest!
If you are a woman of color, this is very important. This information is not widely known in our communities, and we have been left out of creating generational wealth. My mission is to help you understand about investing, because the more we thrive, the more we can sit at tables that create change.
The Magic of Compound Interest
Let’s start with one of the most incredible things about investing: compound interest. This is where the real magic happens. When you invest, your money earns interest. But then, that interest also earns interest. It’s like a snowball effect—your money keeps growing! This is why starting early is very important! The longer your money sits in the stock market, the longer it has to grow.
Let’s dive into some examples here:
Example 1: Let’s say you invest $1,000 in a stock that grows by 7% each year. By the end of the first year, you’ll have $1,070. In the second year, you’re earning 7% on $1,070, which means you’ll have $1,144.90 by the end of year two. After 30 years, that $1,000 could grow to about $7,612!
Example 2: Let’s say you invest $10,000 in a stock that grows by 7% each year. By the end of the first year, you’ll have $10,700. In the second year, you’re earning 7% on $10,700, which means you’ll have $11,449 by the end of year two. After 30 years, that $10,000 could grow to about $76,120!
Example 3: Imagine investing $500 per month into a mutual fund that averages a 6% return annually. After 10 years, you’d have contributed $60,000, but with compound interest, your investment would grow to approximately $81,000.
Example 4: Now, imagine investing $1,000 per month into a mutual fund that averages a 6% return annually. After 10 years, you’d have contributed $120,000, but with compound interest, your investment would grow to approximately $162,000.
The Stock Market: A Powerhouse for Growth
The stock market can be a roller coaster. There is no doubt about that. Very often, you will hear about people freaking out how the stock market is down. However, historically, it’s been a great place to grow your money. Focus on what the stock market has done in the past 50 years, 20 years, instead of the past year, six months, or today.
Imagine you put $5,000 into an S&P 500 index fund. The stock market has historically returned about 7-10% per year.
Example 1: So, if you invest $5,000 and leave it there for 20 years with an average return of 8%, you’d end up with around $23,300.
Example 2: If you invest $50,000 and leave it there for 20 years with an average return of 8%, you’d end up with around $233,000.
Example 3: If you invest $100,000 and leave it there for 20 years with an average return of 8%, you’d end up with around $466,000.
Example 4: If you invest $100,000 and leave it there for 30 years with an average return of 8%, you’d end up with around $1,006,000. That is a million dollars!
Okay, wow! Do you believe you will be the first millionaire in your family? Because, I do!
Here is a tip: Focus on increasing your income, and do not inflate your lifestyle. This way, you can increase your monthly investments and hit your first $100K invested!
I BELIEVE IN YOU!
Patience and Consistency is Key
Here’s the key to all of this: patience and consistency. Investing isn’t about getting rich overnight; it’s about letting your money grow over time. The earlier you start, the more time your money has to grow.
Remember, investing is about staying the course and not freaking out because the economy fluctuates. The economy is supposed to crash and recover every single time.
Example 1: If you start investing $200 a month at age 25, by the time you’re 65, assuming an average return of 7%, you’d have over $500,000. But if you wait until you’re 35 to start, you’d only have around $242,000. That’s a big difference!
Example 2: Let’s say you invest $100 a month starting at age 30, with an average return of 6%. By age 65, you’d have approximately $140,000. If you waited until age 40 to start, you’d have only about $70,000 by 65.
Example 3: Suppose you invest $50 a week starting at age 20. With an average return of 8%, by age 60, you’d have over $650,000. If you waited until age 30 to start, you’d have about $280,000 by age 60.
Example 4: Imagine investing $300 a month starting at age 40. By age 70, with a 7% average return, you could have around $367,000. But if you waited until age 50 to start, you’d only have about $173,000 by age 70.
These examples help you understand how important it is to start investing early. Many Americans rely on Social Security for retirement, but we are unsure if it will exist by the time you retire. Even if it does exist, it may not be enough money to sustain your lifestyle or to finally start doing the things you have been wanting to do.
For the eldest daughters and daughters of immigrant parents, this is one way to help your parents get ready for retirement. Even if they cannot invest high amounts, something is better than nothing at all. This is one way to help them use their own money as a tool to prepare for their retirement, and if you are their retirement plan, this helps you, too!
Compound Interest Calculator
Have you heard about the compound interest calculator? You can find it HERE.
Feel free to run your numbers whenever you want. Run any scenario to help you calculate how much you should start investing a month to hit your goal by the time you retire.
Let Your Money Work for You
Investing sounds complicated, but at its core, it’s all about putting your money to work. Investing is one of the best ways to grow your wealth over time. You may not come from wealth, but it will start with you.
You can change the trajectory of your life and future generations.
You are creating generational wealth.
Remember, you don’t need a lot of money to start investing. Even small amounts can grow into something significant with time. As your job situations change and your salary increases, you can invest more as the years go by.
When We Work Together:
- I help you gain control over your finances and feel confident managing your money
- I help you gain confidence investing by learning how investing works and the different investment accounts
- I help you prioritize your finances and leverage your parent’s income to prepare for their retirement
I invite you to work with me 1:1. I want to help you build wealth and help your family members come up with you! We are not leaving anyone behind. Everyone gets to come with you. Book your call below.
I cannot wait to meet you. Abrazos!
