Gratz on your accomplishment.
I hope you earn better returns than I have the past 10 years
Everyone keeps saying how it starts to snowball and grow faster but for me even though contributions now make up a very small% of my portfolio the returns have been so bad for the stock market the past 10 years I still get most of my growth from contributions.
looking back over the last 100 years, the best times to add new money to investments (stockpiling) were always when the market looked grim and had horrible returns for the previous 10-15 years. Everything is discounted, you're loading up money at the bottom.
If history is any indication, this rut we're in can't possibly last much longer. Everyone will look back at the turn of the century as the golden opportunity to have gotten in at the bottom before things took off again (what we're in now is probably equivalent to the mid to late 80s). Might be another 5-15 years, but for people at our age we're going to see another decade like the 90's at some point. My guess is we'll see a new bubble in something (ie: biotechnology...) about 10 years from now.
Seems every 25-30 years (any coincidence that it's a generation in length?) there is a period where everyone says "this time its different, it really isn't going to get any better, ever."
I'd much rather have $100K in at the bottom, than deciding it's finally time to start saving heavy while the market is soaring. 40 years from now you'll probably look back and be thankful that your first $100K was made between 2000-2012, if you were 10 years younger (and started 10 years earlier) you would have gotten your first $100K in during the 90's and spent the last 12 years even more frustrated about the growth (or lack thereof).
Assuming any 40 year period has approximately the same overall return... models where most of the growth occurs in the later years can far exceed the returns of models where a lot more of the growth is seen earlier on:
Excel to hit home the point:
Account A and B each invest $10,000 a year for 40 years.
Account A starts off with a 0% return that goes up each year by 0.25% (so in year 40 it gets a 10% return)
Account B starts off with a 10% return that goes down each year by 0.25% (so in year 40 it gets a 0% return)
So each account experiences the same 40 year growth average, but one gets most of the growth at the start, while the other gets most of it at the end.
The end result is:
A = $1,764,714
B = $928,981
Each account invested $400,000 over 40 years and received the same overall return, but the account with its best returning years towards the end did way better than the account with its best years up front.
Math like this helps me smile whenever the market drops (or becomes a bargain)... at least at this early stage in my life.
