Investing: can 1% equal thousands?

We tend to discount little numbers and don’t think they’ll add up. But when it comes to investing and compound interest, they’re like magic.

Let me show you what I mean.

If you invested $10 a day – and be honest – that’s not hard to find – earning a 4% return over say 20 years, you would have just about $114,000. Not bad, right?

But what if you really paid attention to those investments and were able to get 5% instead of %4 as a return? Now at the end of 20 years investing that $10 a day, you’d have a sizeable pot of money to the tune of nearly $128,000. Did you just do the math? That’s an increase of about $14,000 by paying attention to something so small - a marginal increase in what your investment returned.

Try some simple number crunching for yourself with this great calculator.

Another way to increase your investing return is to reduce the fees that you pay for those assets.  Do you know what your mutual fund charges you per year for management fees (the MER)?  How much does your financial advisor charge you to manage your money or the commissions when you buy or sell your stocks?  If you don't know, check your statements and call up your professional.  Reducing those fees even by a quarter or half a percent per year can add up to thousands or even tens of thousands  of dollars over the long-term!

Watch my video on this topic here.

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