Wealth By Compounding website has been set up to provide you with information about how to use Compounding as a Strategy, to grow your Wealth. Set up a Retirement Account today, don’t rely on pension funds, you need to be in control of your future, not other so-called ‘managers’.
COMPOUNDING IS THE 8TH WONDER OF THE WORLD
So said Albert Einstein, many years ago. Actually what he said was
This website will show how Compounding is by far the best Long Term Strategy for Creating Wealth. The idea of investing in dividend paying companies, then reinvesting those dividends into more shares, using the ‘compound interest technique’, is a very powerful long term strategy.
My post on 9/3/17 Top 20 Dividend Stocks, For Your Compounding Portfolio, shows how 20 of the 22 Dividend Kings, out-performed the Index Fund ETF (SPY), by a whopping 22.91% per year Compound!
The period in question, was from 8/1/95 to 8/31/17.
The 20 stocks(from the Dividend Kings List), returned 1042.96% Compound over this period.
The Index Fund (SPY), returned 538% Compound over this period.
The difference is 504.07%, or 22.91% Compound per year.
To download the excel file with results, click here
The chart below shows how Compounding returns just under 300% compared to not Compounding, over a 20 year period. Why would you not do it?
- If i told you that $1000 invested at year 1 grew to $10,921 at year 50(5% p.a. dividend), would you believe it?
- If i told you that $1000 invested at year 1 grew to $106,718 at year 50(10% p.a. dividend)?
- If i told you that $1000 invested at year 1 grew to $942,310.82 at year 50(15% p.a. dividend)?
- If i told you that $1000 invested at year 1 grew to $7,583,698.46 at year 50(20% p.a. dividend)?
These amounts can be checked here, with an excel file i prepared.
The above results show why COMPOUNDING is an excellent long term investment strategy, and is an ideal investment strategy for anyone starting a retirement account. A long term outlook is needed though, we want to buy and hold our investments, letting them compound.
What if i said i could better those returns, would you believe me?
Currently there is a group of stocks on the S&P 500 called the DIVIDEND ARISTOCRATS, and also a group of stocks called the DIVIDEND KINGS.
Dividend Aristocrats-Stocks listed on the S&P 500, with at least 25 years of paying INCREASING DIVIDENDS.
Dividend Kings-Stocks listed on US stock exchanges, with at least 50 years of paying INCREASING DIVIDENDS.
Creating Wealth By Compounding produces excellent long term Returns
I just want you to think for a second, if you buy one of these stocks, EVERY SINGLE YEAR they will pay a dividend, and EVERY SINGLE YEAR that dividend will BE GREATER(as a percentage), than THE YEAR BEFORE. This means that if your initial yield is 3%, the yield will grow on your original starting capital for 2 reasons:-
1/ the yield increases every year because of the ‘compound interest strategy’.
2/ the yield will increase AGAIN because of a GROWING DIVIDEND.
These 2 reasons show that investing in these 2 groups of companies is a ‘no brainer’, they are the safest stocks(in terms of proven performance), you can buy. They have shown their ‘business model’ works, through all types of economic upheavals, stock market downturns etc.
The simple way to invest well, is to buy stocks from these 2 groups, and stay invested, only selling the stock if their dividend policy changes. One of the first things to suffer in a dividend company, when they are having problems, is the amount of their dividend.
It’s a simple way to ensure you have top performers, sell those with dividend cuts.
If the company does not meet the requirements of these 2 indexes anymore, sell them. It is a simple but effective way to cull poor performers.
The other excel files i have prepared are individual company returns over 10,20,30,40 years(where possible). Also returns over 1,2,5, years. These are for comparison purposes, and they show how these companies perform over a long time frame. You will note that many companies have an annual return of 10% or more per year, over the longer time frames. The excel file for 10,20,30,40 years can be found here, and the excel file for 1,2,5, years can be found here.
Be sure to keep a copy, and print these excel files. They were prepared at different times over the last 12 months, but on 08/01/17 i will update these tables again.
I have even prepared an excel file of the ‘hot companies’, those with the best returns over the past 1,2,5,10 years, see here.
The above excel files have data sourced from YahooFinance, and any data missing is not my fault. I suspect their data only relates to S&P listings, i’m not completely sure. The companies in the lists were correct as at 8/1/2016.
If you decide on a retirement account, these excel files can be used to choose which company to invest in, the one with the best current yield, or the current ‘hot company’. The choice is yours.
The chart below shows how an extra 2% average yearly return, equals a doubling of your account, over 40 years! Some thing for you to think about!
Conversely, a 2% fee cost per year, will result in your account being HALVED over 40 years! Some thing for you to think about!
10 Strategies For The Long Term, Using Compounding To Achieve Superior Returns
The following SIMPLE strategies will be started with a return that is updated every week, starting in 10/10/2013. This date was chosen as this was the date a particular ETF(Exchange Traded Fund) was started. They can be used as a comparison, and an EBOOK which i have written, detailing these strategies in detail, is available for purchase from this site.
There are 5 strategies, and 5 ‘enhanced’ strategies available, suitable for ALL STOCK MARKET CONDITIONS.
Strategy Update-Started 10/10/2013-Current w/e 09/15/2017(return since inception/yearly return)
|Since Inception 10/10/13||Since Incep.||Yearly||Since Incep.||Yearly|
The 5 strategy results, shown above, with their respective ‘enhanced return’ strategies, will be updated weekly.
You will note there is not a lot of difference in returns at present. This is simply because there has been no stock market ‘correction’ of significance since the 2007-2008 ‘credit crisis’.
Once we have a few ‘corrections under our belt’, these numbers will change significantly. Meantime, we just keep plugging along, accepting that our returns are generally in line with the market.
Check out my Dividend Kings Case Study, to see if my Strategy is beating the Index results. Check it out here.
Any returns shown on this website will be TOTAL RETURN, i.e. returns with dividends reinvested.
Tax treatments will be different in different countries, and with the ‘vehicle’ you are investing through. Please speak to a TAX PROFESSIONAL to ensure you have the LOWEST tax structure for your retirement account.
Compounding is a wonderful long term Strategy. If Albert Einstein says its a wonder of the world, he would know. Create wealth by compounding using your Retirement Account, and enjoy a much better Retirement. The longer the Compounding Strategy works, the better your Returns.