4 ms·
Many people are downvoting you but you're right. Browne is implying that your investment returns will not outpace your career earnings. This may not be true at
by tanderson92 9y ago
Many people are downvoting you but you're right. Browne is implying that your investment returns will not outpace your career earnings. This may not be true at all, with compound interest over a lifetime.
- mfoy_ 9y agoFor a contrived example, let's make the following assumptions: 1) There is no inflation. 2) Your capital investments always return 5%. 3) Your salary is $100,000 and does not change. 4) You are able to save 50% of your income and invest it. At year 0, you are worth the equivalent of $2,000,000 invested. It won't be until year 40 that your investments are returning the same amount as your starting salary. Presumably, you plan to retire sometime around year 45 (~65-ish). Thing is, there is inflation, a 5% return isn't guaranteed, your salary will probably increase, and saving 50% is pretty ambitious. All of these things actually make it harder to get a better return than your salary.
- tanderson92 9y agoThis is incomplete as well as incorrect. It is incomplete because: presumably you do not die immediately upon retirement. A 30 year retirement would see your investments compound for an additional 30 years after your career income stream ceases. This can dwarf the $2M total you save over a 40 year career at $50k/yr. It is incorrect because even after the 40 years your net worth is $6.5M on gross lifetime earnings of $4M.