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You are making a calculation mistake. If interest rates are 20%, then $1.20 next year = $1.00 this year. In reality, the person who invests the money actually
by yummyfajitas 11y ago
You are making a calculation mistake. If interest rates are 20%, then $1.20 next year = $1.00 this year.
In reality, the person who invests the money actually comes out worse. If his investment had either profit or capital gains, he paid even more taxes. I.e., instead of getting $1.20 next year for every $1.00 he put in this year, he's getting something less than that.
With the current taxation regime, the only benefit to investment is shifting consumption into the future. But you actually pay pretty dearly for that. You can see a more detailed explanation here: http://www.themoneyillusion.com/?p=28842 http://www.themoneyillusion.com/?p=28842
- deleted 11y ago[deleted]
- chollida1 11y ago:) The interest rate isn't mentioned, but its probably around 1%. The funds capital gains were 20%. I'll let you re-read my above posts to figure out where you went wrong. My email is in my profile if you need help:)
- yummyfajitas 11y agoThe average investment will achieve average returns (== the interest rate to use for this calculation) and as a result one loses NPV(consumption) by investing. Only a tiny fraction of Individual 2's actually manage to do what you are describing.
- deleted 11y ago[deleted]