Mar 29, 2017

Life Strategies: Apply the Concept of Compounding to Your Life

I came across two articles recently that had me nodding my head frequently because they made a lot of sense. Both articles dealt with a similar theme: how small, incremental changes add up to large improvements over time. I like to think of the NGPF blog as an example of this. In the process of curating and writing two blog posts everyday (with help from the team), I hope that I am getting a little bit smarter about personal finance and more creative about brainstorming ways for educators to utilize these resources in the classroom.

The first article from the Irrelevant Investor blog views the issue from an investor’s perspective. Here’s a sampling of recent headlines that demonstrate how the media tends to stay focused on the negative:

  • “Market drop the largest this year.”
  • “Has Trump trade run its course?”
  • “Stocks at historically high valuations”
  • “Five reasons to sell stocks now”

Since the market has bottomed in 2009, there has been a steady drumbeat of doom and gloom from the media often called the “Wall of Worry” (see below) that would have given investors countless reasons to sell out of the market. Of course, sellers would have missed out of the 257% return since that time. Moral of the story: sometimes it’s best to ignore the noise.

sell

The second article, from What I Learned on Wall Street blog, applies demonstrates how small daily practices compound over time to make us better learners, better in relationships and better investors. This is a very short read and I don’t want to give it all away here so I will only describe the advice on how you can become a better learner:

Try to go to bed 1% smarter every day, if you do that for a few years, you’ll quickly be one of the smartest in your industry.

Three simple things to shoot for every day.

  1. Try to speak to one person smarter than you
  2. Read 25 pages of a book – preferably one more than 10 years old
  3. Read one newspaper everyday – yes, they are still useful 

I am excited to get started:)

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Here’s one of the most popular NGPF Data Crunches to demonstrate the power of compounding returns and why investing at a young age is SO important.

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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