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Here are five wealth creation principles that will remain true forever.
1. You must get time on your side by investing early in your lifetime. Time adds value to money. Delayed investing shortens your time, which increasingly requires the compensation of higher and higher returns to meet your retirement goals. Examine the following graph to see how time affects your investment growth.
Source: Financium
2. Your investment growth must exceed inflation. If you earn 8% on a $10,000 investment per year, over 20 years with inflation at an average 4% your actual investment will grow to $457,620, but your actual buying power in the future will only be $208,852 (while your money is growing, inflation is increasing the cost of goods). The graph below indicates how inflation might affect your investment’s future buying power.
3. Algebraic factors apply to investing. You can indicate your multiple on capital invested by applying mathematical rules, factoring in both time and rate of return.
· Double Your Money: Rule of 72. To find out how many years it will take to double your money, divide 72 by your average annual rate of return.
· Triple Your Money: Rule of 113. Divide 113 by your average annual rate of return to see how many years it will take to triple your invested money.
4. Taxation can reduce your investment returns.
Every dollar of tax retained through tax-planning is a dollar earned.
· Deduct what you can against your income. Business owners have the advantage of deducting many operating expenses from their revenues.
· Contribute to registered investments. For both business owners and employees, registered investments may allow deductions against earned income and may offer tax-deferral.
· Defer as much taxation as possible. The beauty of registered investments is that they allow some tax planning benefits depending on your income, and capital available to invest.
5. Become an active investor. It is important to begin investing early in life when you get your first job or begin your career. By beginning early, you can have the above stated mathematical laws of doubling and tripling your money working for you. Many wait far too long before investing and lose the value that time can add to a good investment portfolio by increasing the future accumulation of investment money.
Source: Financium
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This material was prepared by Adviceon Media on behalf your Investment Advisor with Aligned Capital Partners Inc. (“ACPI”). This material is provided solely for general information and should not be considered individual investment advice or construed as an offer or solicitation to buy or sell securities. The information contained herein may not apply to all types of investors. Before acting on this material, please seek professional advice, as appropriate, based on your personal circumstances. All opinions expressed and information provided herein are subject to change without notice. Although this material has been compiled from sources believed to be reliable as at the date of publication, we cannot guarantee its accuracy or completeness. All charts and illustrations in this document are for illustrative purposes only and they are not intended to predict or project investment results. In considering any particular investment, please remember that past performance is no guarantee of future performance. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Progress Private Wealth Inc. of ACPI, an approved trade name of ACPI. Only investment-related products and services are offered through ACPI/Progress Private Wealth Inc. and covered by the CIPF.
Aligned Capital Partners Inc. (“ACPI”) is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Progress Private Wealth, an approved trade name of ACPI. Only investment-related products and services are offered through ACPI/Progress Private Wealth and covered by the CIPF.
