How I Turned a Few Dollars into a Small Fortune
When I graduated college, I received what I considered a small amount of money in gifts, $500. Since I had saved money working part time, I didn’t really need it for supplies or anything. I had won a scholarship too so between that and a student loan, tuition and room/board were covered. I had read somewhere about investing, or heard from someone. I didn’t know anything about it at the time. In fact after I did what I am about to tell you I forgot about it and didn’t continue it for many years. So what am I referring to? Investing. that’s right, a kid just starting college, I invested it.
Since I didn’t know what I was doing, I blindly invested it in a fund a friend’s Dad told him about. I went with the Vanguard S P500; Index Fund known by the stock ticker symbol: VFNIX but there are many good ones out there. This one tracks the S P500; performance. That means it replicates the average performance of the top 500 Large Cap Corporations in the U.S. For me, it was an experiment, kind of like digging a hole in the ground and planting a time capsule. The funny part is I didn’t think about it again since I had set it up. Back then, no one was using computers so, “out of site, out of mind.” Fortunately for me, it was a ‘no load’ fund and the fees were the best around. Since I moved around a lot in those days, I never received the statements that were sent periodically, or maybe my friend’s Dad took care of things, I don’t really know because we’re no longer in touch. it was a long time ago, mind you.
One day about 20 years later I was reading something and paused to reflect and then I remembered about the investment. I was in middle of moving and found a box with some old records in it. I found the receipt that I had from opening the account and contacted the brokerage with my account number to check in on it. To my amazement, it was no longer worth a measly $500, it had accrued interest at an average annualized rate of 11%, annualized before taxes. That amounted to over $4,000! Even accounting for inflation and taxes, it was worth over $3,000. If I convert this dollar euro, it could still be a huge amount of money. I realized, it I did not invest my money, or if I spent that money in buying some worthless things, it could not turn into something I did not expect.
By then I knew a great deal about investing and decided to withdrawal it and invest it myself on line with various stocks I chose. A couple years later that amount gained at 22% and I turned that $3,000 net gain into an additional gain of $4,000 (in only 2 years, not 20), for a grand total after taxes and fees of approximately $6,500. But if I would have let it ride another 18 years to match my original investment, with a gain at a more sustainable 15% it would have become worth $80,000 before taxes and fees. But I don’t have that kind of patience.
So that is what I consider the best use of graduation money. For those of you that have gotten more than that, just imagine the possibilities of investing your money. And if you are contribute to it annually as well, it can work out even better. For those of you Wall Street “nay-sayers” out there, keep in mind that this kind of return is what I averaged over 3 major stock market crashes (one in the 80’s and a little one in 2002 and recently in 2008. If you were fortunate enough to receive $5,000 and invest it at 12% over 25 years, after taxes and accounting for inflation it could be worth over $50,000.
Jesse Waters is head content writer and article at God Men. He found out about his love for writing when he was struggling with cancer. His works are very sensitive and he writes with his heart.