The Two Golden Rules of Investing

Imagine you have $100,000 to invest today and you're considering the S&P 500 for its long-term growth prospects.

Here's where two powerful thumb rules come into play:

Rule of 114: Divide 114 by the expected return percentage to estimate the number of years it takes for your money to triple.

Rule of 70: Divide 70 by the average inflation rate to estimate the number of years it takes for your money's value to halve.

Let's see how these rules apply to your $100,000 investment:

1. Rule of 114: If the S&P 500 historically averages a 12% return, then 114 / 12 = 10 years for your money to potentially triple to $300,000.

Sounds impressive, right? But wait...

2. Rule of 70: Let's say the average inflation rate in the US is 7%. 70 / 7 = 10 years. In that timeframe, your purchasing power with $300,000 would be roughly equivalent to today's $100,000.

This highlights the crucial point: Beating inflation is key to growing your wealth.

So, while your investment may grow on paper, inflation erodes its buying power over time. Here's what you can do:

1. Invest for the long term: Historically, the stock market has outpaced inflation over extended periods.
2. Diversify your portfolio: Spread your investments across different asset classes to manage risk.
3. Consider alternative investments like Multifamily Real Estate:

Multifamily real estate investing can be a compelling option for investors seeking potentially stronger returns and potential hedge against inflation. Owning apartment buildings or complexes generates rental income, which can provide a steady cash flow and potentially appreciate in value over time. Additionally, rental income can help offset inflation, as rents often rise with inflation.

Remember, this is a simplified example. Investing involves risks and there are no guarantees. Consult a financial advisor to develop a personalized investment strategy tailored to your goals and risk tolerance.

What are your thoughts on beating inflation and growing wealth? Share your tips in the comments!

Have you considered Multifamily Real Estate Investing?

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