While $100 might not initially seem like much, its potential for growth turns out to be substantial, particularly when you consider the returns it can generate over time.
Let’s delve into a hypothetical scenario: imagine your parents or someone you know invested $100 in a particular asset or commodity back in 1970, a period spanning 54 years, which is well within the average human lifespan.
We’ll start with the worst-case scenario: if your parents simply held onto the $100 bill for most of their lives, its value would grow to $956. However, its purchasing power would significantly diminish over time due to inflation and the increasing money supply.
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Optimal and common investments
This example vividly illustrates the power of compound investing. If they chose to invest in real estate, their initial $100 would have grown to $1,542 by now, assuming an average annual return rate of 5.5%. Alternatively, opting for US 10-year treasury bonds would have yielded a value of $2,286 today.
Turning to the perennial favorite for guarding against inflation, gold, the initial $100 investment would now be worth $5,545 in 2024. Similarly, investing in corporate bonds, a type of debt security issued by corporations to investors, would have multiplied the initial $100 to $7,775.
Best-case scenario investment
If you chose to disregard all the previous investment options and remained steadfast through numerous economic crises, including the dot-com bubble and the 2008 financial crisis, the stock market would ultimately reward your patience and faith handsomely.
Specifically, investing $100 in the S&P 500 five decades ago would have grown to an impressive $22,419 in your bank account, boasting a robust annual return of 11.3%.
These returns underscore the significance and benefits of investing, offering protection against inflation and, in the best-case scenario, yielding substantial returns.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
