Giving Thanks

This year all of us at TSA Wealth Management have a lot to be thankful for.  You, our wonderful clients, being at the top of the list.  Without you, nothing else in our lives would be possible so from the bottom of our hearts, thank you. 

The Unimaginable Power of Exponential Growth 

 Since this is our last note before Thanksgiving, I figured I’d send out the same thought experiment I sent around this time last year. Feel free to use it with friends and family around the dinner table.  

Here it is: How many times would you have to fold a piece of paper before it was thick enough to reach the moon? 

The Answer: 42 times.

When you fold the paper in half it becomes two pages thick.  When you fold it again, it becomes four pages thick.  After three folds it is 8 pages thick and after the fourth fold it is 16 pages thick.  As the doubling continues, the numbers quickly become unimaginable and by the time you are at 42 folds, the paper is over 4 trillion pages in size which - at a thickness of .1 millimeters per page – is a book tall enough to cover the distance between the earth and the moon. If you could fold the paper 103 times, the pages would grow beyond the size observable universe.  
 
 What does this have to do with personal finance? 
  
Einstein once described compounding interest as the 8th wonder of the world, and I tend to agree with him.  You start out with $1 and, if you grow it by 7.2% annually, you will double the value roughly every 10 years so that after a decade your one dollar will have turned into two dollars.  In 2 decades, you will have four dollars and in 3 decades you will have eight dollars.  Eight dollars isn’t that exciting BUT give it a century and you are over one thousand dollars.  Give it two centuries (20 periods of doubling) you are over $1 million. 
  
In other words, building generational wealth isn’t about picking the best stocks or betting on the timing of short-term market swings.  It is about staying invested, teaching future generations about stewardship, and letting the money double slowly but surely over time.  As of writing, the Dow Jones Industrial Average is a little over 34,000.  When it comes to investing there are no guarantees but, one day in the future, it will likely exceed 68,000.  Not too long after that it will likely hit 136,000, 272,000, 544,000 and so forth and so on.  That is the nature of compound growth.  It just needs time.              

Finally, I’ll wrap up this note and repeat my thanks.  I love my job and helping you with your investments and planning continues to be one of the great joys of my life. Thank you, have a wonderful Thanksgiving, and as always, if you have any questions please never hesitate to ask.