Investing Rule #2: Invest Early and Often (common sense investing)

All videos and book at http://financinglife.org . This quick example illustrates the miracle of compound interest and the importance of starting to save early. This is part of ten short videos series that summarizes the common sense investment advice from John Bogle, which his followers endearingly call the Boglehead Investment Philosophy. It describes the best ways to invest money, and the best place to invest money. You'll learn how to choose mutual funds, why index funds are smart investments, and how to invest in bonds which should be a part of everyone's asset allocation.

Comments

1. Great video, I just have one concern--I ran both of the numbers used in your examples on several compound interest calculators and obtained significantly lower values. 
   
   For Tabitha, $50,000 compounded annually at 10% for 33 years is $1,161,257.72. 
   At first, I thought maybe her original $5000 had been compounded over her first 10 years of saving ($87,655.54) and added to the $1,161,257.72, but even if this was true, her total retirement income at 65 would still only be $1,248,913.26--approximately $600,000 shy of the video's estimates. 
   
   Am I missing something here? I would really appreciate any input as I am trying to run estimates for my parents' retirement. Thank you!
2. 9% will double every 8 years. 6% will double every 12 years. 4% will double every 18 years. 2% will double every 36 years. But what you really care about is "real interest" rate, which is the rate above inflation. In general, the market used to average 10% a year but investors would lose 2% of this in unnecessary fees and another 2% in bad decisions (emotion driven). Congrats on your start. Also consider the books recommendations at (search boglehead recommended books) then find in library.
3. been putting away money for 15 years...saved a lot but I'm not exactly seeing the money double up every 8 years as this video seems to allude to...maybe it's a combination of the 2002 dot com bust and 2008 housing crisis and me putting my money away to someplace safer when those events occurred that affected returns. The way the economy is going 2% a year seems more realistic.
4. Thanks for your comment. This is absolutely true. Although this was the stock market average for many decades, many think future growth will be slower. But the miracle of compound interest works for small percentages too so the points in the video are as valid as ever. All the more reason to start saving early and often, and focus on a common sense plan that will beat inflation.
5. 10% a year is pretty unrealistic, especially in today's economy
6. @hyeinee Congratulations for starting! It sounds like you have multiple goals you need to save for (e.g. nice home, comfortable retirement, etc.). The key thing is to start early. Investing is simple, but not easy. Results are not likely to be as rosy as this example because (1) the stock market may not be as generous in the future, and (2) most of us want to become more conservative as we approach our goals—which means gradually shifting to own more bonds and at a lower rate of return.
7. I've accumulated savings just as Tabitha did...but now I have to use the money as a down payment! It's so hard to part with the money! Ugh... housing market better not let me down!!
8. It's nice to save money but real interest rates are negative because real inflation is higher than interest rates. We're headed for a stock market crash too. If I was going to save I'd be buying nothing but gold and silver.
9. Congratulations! They key thing when you are young is to get into the habit of saving. Suggest you also look at my video "Extra: Start with a Sound Financial Lifestyle". All the best to you! -Rick
10. Im 22 and have just started a Roth IRA. Im looking to fully fund it every year up to the $5000 max. And I work just minimum wage. A millionaire pizza driver!!