EXPLAINED - How To Double Your Money With Compound Interest
Published: 2024-04-28
Status:
Available
|
Analyzed
Published: 2024-04-28
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
A penny doubled daily for 30 days could grow to over $5 million, illustrating the power of compound interest.
"if you start with a penny today and you can double your money every single day for 30 days after 30 days that penny is going to turn into more than $5 million"
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A 1% annual return on savings accounts or CDs would take 72 years to double money, highlighting the slow growth compared to other investments.
"if we look at this where you get a 1% return on your money and I'm being very generous here it is going to take you a long time for you to double your money at this rate keeping your money in the bank is going to take you 72 years to double your money"
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Historically, the stock market has provided 8-10% annual returns, leading to faster wealth growth than low-interest savings.
"the stock market on the other hand has gone up by between 8 to 10% a year historically so even if you stay on the low end here 8% you're going to be able to grow your money much faster"
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An 8% annual return in the stock market can double an investment in approximately 9 years.
"if you can grow your money by 8% a year in the stock market you can double your money every 9 years"
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The speaker targets a minimum of 7% cash-on-cash annual return for real estate investments, ideally aiming for 8%.
"when I invest my money I'm looking for a 7% annual return on my money cash on cash minimum ideally something closer to 8% but 7% is my real minimum"
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A single penny, doubling daily for 30 days, will grow to over $5 million.
"if you start with a penny today and you can double your money every single day for 30 days after 30 days that penny is going to turn into more than $5 million"
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Starting with one penny and doubling daily, one can accumulate $10,000 by day 21 and over $5 million by day 30.
"by day 21 you have $10,000 now your money is really starting to grow and by day 30 you're going to have over $5 million and you started with just a penny"
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Actively compounding wealth in real estate involves buying a property, renovating it, selling for a profit, and reinvesting the entire proceeds into a larger property.
"you go out and you buy a $100,000 property you renovate it whatever you fix it up and you go sell this property for $150,000 now instead of going and buying another $100,000 property you go out and you buy $150,000 property"
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Profits from YouTube videos are reinvested into the business, specifically into a blog, newsletter, and app development, as a strategy for active compounding.
"Anytime somebody watches our videos on YouTube I get paid... but what I actually do with this money is I reinvest this money back into our business... I'm reinvesting it back into a Blog I'm reinvesting it back into a newsletter and I'm reinvesting it into an app that we're making"
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A cell phone accessory business scaled by reinvesting profits from initial sales into purchasing larger quantities of inventory (10 -> 20 -> 50 -> 100 battery packs).
"we bought 10 of these battery packs and we sold them and then we took this money that we got in our profits and we went out and I think we bought 20 battery packs and then we bought 50 and then we bought 100"
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A significant risk of active compounding is that if no profits are taken out for personal use, and the venture fails, all accumulated wealth can be lost.
"there is a risk though because if you keep growing it and you don't take out any money for yourself eventually there's a chance that things don't work out and now you grew your $1,000 into $100,000 or a million dollar and then things fail and if you didn't take out any money for yourself now you're left with nothing"
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Elon Musk reinvested all $25 million in profits back into his business in the early stages, leaving nothing for himself to compound wealth.
"when he would make $25 million he would reinvest all of this money back into his business and he would leave nothing for himself"
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Savings accounts and CDs offer very low returns (0.1% to 1%) and would take 72 years to double money, making them ineffective for wealth building.
"if you write bank account you're not going to get a very good return... a savings account nowadays is going to pay you like .1% if you're lucky and a CD is going to pay you 1% if you're lucky... keeping your money in the bank is going to take you 72 years to double your money"
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Historically, the stock market has provided an annual return of 8% to 10%.
"the stock market has gone up by between 8 to 10% a year historically"
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An 8% annual return in the stock market allows for doubling money every 9 years.
"if you can grow your money by 8% a year in the stock market you can double your money every 9 years"
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Reinvesting dividends from companies into buying more shares automatically grows one's ownership and subsequent dividends.
"when you get this dividend then you can reinvest this dividend back into the stock market and buy more shares that way now your money is actually growing so you invest in dividend paying company this company gives you some cash then your money automatically gets invested that way you can own more shares"
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Dividend-paying companies are typically large and mature, possessing excess cash with no better internal reinvestment opportunities.
"companies that pay dividends are typically larger and more mature companies... because these are companies that at the end of the year they have so much cash in their bank account they have no better use for their money"
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Startup companies that reinvest all profits back into the business, rather than paying dividends, can lead to compounding through increased company value.
"companies that are reinvesting their profits if you find more of a startup company that you really like and you really believe in... anytime they make money they don't give it away in dividends they take this extra cash and they reinvest it back into their company"
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The speaker targets a minimum 7% annual cash-on-cash return on real estate investments, ideally aiming for 8%.
"when I invest my money I'm looking for a 7% annual return on my money cash on cash minimum ideally something closer to 8%"
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A 7% annual return on investment will double the money in 10 years.
"if I get a 7% return on my money it's going to take me 10 years to double my money"
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A 1031 exchange allows real estate investors to defer capital gains taxes by reinvesting all sale proceeds into another property.
"I can take all $200,000 pay pay $0 in taxes and go out and buy a $200,000 property that's going to pay me with more passive income"
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Real estate investors benefit from tax advantages like the depreciation deduction, reducing taxable income on passive income.
"there's a lot of tax breaks that I get with real estate that I don't get with the stock market so even as I get the $7,000 a year in passive income I don't have to pay taxes on all $7,000 because there's other tax deductions that I can take like something called the depreciation tax deduction"
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Dividend stocks are generally safer with lower returns, while startup-like companies (implying high-growth potential, not necessarily startups themselves) and potentially real estate offer higher risk and higher potential returns.
"with these dividend Investments... you're going to have a safer investment which usually comes with a smaller return... it's not anything huge... with real estate... there's a chance that this company will fail... more risk... higher potential returns"
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Compounding money with increasing contributions significantly accelerates wealth growth, enabling doubling, tripling, or quadrupling of funds.
"if you could understand that idea of compounding your money with growing contributions you will know how to double your money triple your money quadruple your money"
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A 10% annual return on investment will double money in 7 years.
"if you can get a 10% return on your money it's going to take you 7 years to double your money"
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A 20% annual return on investment will double money in 3.8 years.
"if you can get an even better return if you can get a 20% return on your money well now you can double your money every 3.8 years"
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Carrying credit card debt results in paying high interest, making credit card companies rich at the expense of the debtor's future wealth.
"your credit card company is doing it each and every year... if you carry credit card debt and you're paying interest on this credit card debt you are making your credit card company Rich"
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A 50% annual return on investment will double money in 1.7 years.
"if you can get a 50% return on your money well now you can double your money every 1.7 years"
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Startup businesses can achieve 50% year-over-year growth, especially in their early stages.
"if you can go out and start a business you might be able to grow your business by 50% year-over-year especially in the early stages of your business"
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By combining initial contributions with reinvested cash flow (e.g., 4% cash flow leading to a 9% annual contribution growth), an investment fund can exceed $4 million over time.
"assuming that you can get 4% cash flow and you take that 4% cash flow and you put it in here now your annual contribution is going to be growing by 9%... you're going to have more than $4 million"
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Stocks, real estate, and businesses are the top three wealth-building asset classes. Stocks offer investment in companies, real estate provides cash flow, tax breaks, and tangible assets, while businesses offer unlimited earning potential but require the most effort and risk.
"stocks real estate and businesses... stocks give you the ability to go and invest in the companies that make this country... with real estate you get cash flow... you also get tax breaks... you also own a hard asset... businesses this one is the most involved... unlimited earning potential"
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After the 2008 crash, it was possible to find homes for $50,000 that could generate $10,000 in annual profit, a 20% cash-on-cash return.
"back then you were able to find good homes in good areas for $50,000 and then you would be able to rent them out and make $10,000 a year of profit that's a 20% cash on cash return on your money"
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During the 2020 pandemic, high dividend yield ETFs, normally yielding 2.5-3%, saw their prices halved, allowing investors to acquire the same cash flow for 50% less, effectively yielding 5-6%.
"you saw these high dividend yielding ETFs which normally yield somewhere between 2 and 1/2% to 3% now saw their prices cut in almost half which in effect meant that you could buy the same cash flow for almost 50% off and so you were almost able to come in and buy the same dividend yield and now get a five to almost 6% return on your money"
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Financial opportunities can be categorized by their risk and reward profiles: low risk/low reward (savings accounts), high risk/low reward (reselling on Amazon), high risk/high reward (meme stocks, risky crypto, options trading), and low risk/high reward (businesses, digital services).
"low risk and low reward... high risk but low reward... high risk but also High reward... low risk but High reward"
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Amazon FBA businesses are not highly sellable due to lack of proprietary assets and high competition, limiting upside.
"an Amazon FBA business isn't a very sellable company... you have nothing proprietary so everybody else can compete against you"
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Risky crypto staking promised very high interest rates (e.g., 700%) on cryptocurrencies with no fundamental value.
"crypto staking... super risky... cryptocurrencies that really had no underlying value... the whole Hope was that these cryptocurrencies would pay you like 700% interest"
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Digital businesses like newsletters (e.g., Briefs Media) offer low-risk, high-reward opportunities due to low startup costs and scalable revenue models.
"our own businesses... briefs media... it didn't cost me a whole lot of money to start... we have a lot of upside because the newsletter can keep growing"
Pending
Creating digital classes, consulting, or coaching services based on expertise offers low-risk, high-reward potential due to scalability and low overhead.
"create some sort of Education or service-based company digitally... you can create a class... you can charge anywhere from $100 to $2,000 for this class... create some sort of consulting or coaching"
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Investing in certifications (e.g., $5,000 for a data science certificate) that can potentially double income offers a low-risk, high-reward opportunity.
"investing into your own degrees or investing into your own education through something like a certificate... if you can pay $5,000 to get a certificate in data science or to get a certificate in some sort of thing that can double your income"
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To reach $100,000 from zero, the primary focus should be on creating a product and selling it, with less emphasis on optimization or systems.
"from 0 to $100,000 what you need to do is you got to figure out what your product is and you got to sell it... the only thing that you have to do right now is create a product and sell it"
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Building an audience and promoting products can be achieved through media, specifically social media content creation.
"growth using media this is things like social media by creating content"
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Referral marketing, by incentivizing existing customers, and influencer marketing, by paying individuals with an audience to promote products, are key growth strategies.
"getting referral Partners... incentivize people who have an audience who already have a following to promote your product"
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Witnessing parents struggle with money and hearing negative beliefs about wealth can lead to the perpetuation of a generational poverty cycle through learned behaviors and mindsets.
"if you grow up seeing your parents struggle with money and when you grow up hearing your parents say we can't afford nice things... how do you think you're going to approach money when you're 30 years old"
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To become wealthy, one must believe that money is a tool, that it is abundant, and that they personally can achieve wealth.
"you have to believe number one money is a tool... number two that money is abundant and... number three that I will become wealthy"
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A minimum of $2,000 is needed for an emergency fund, with a goal to save $22,000 as quickly as possible.
"you got to have at least $2,000 saved up... I need you to go out and save $22,000 as fast as possible"
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High-interest debts (15-25% annually) should be paid off aggressively before focusing on investing, as the interest paid is higher than potential investment returns.
"a high interest credit card debt is costing you 15 20 25% a year in interest... you should not be trying to invest your money right now you got to pay this off as fast as possible"
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A 75/15/10 plan suggests spending a maximum of 75% of income, investing a minimum of 15%, and saving a minimum of 10%.
"75 cents is the maximum that you can spend 15 cents is the minimum that you invest and 10 cents is the minimum that you save"
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Wealth is built by first investing to make oneself rich, and then using the returns from those investments to fund discretionary spending ('dumb stuff').
"use this money to make yourself rich first with these Investments and then use your Investments to buy your dumb stuff"
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Avoid financing items that do not generate income, with the exception of a home purchase.
"do not Finance anything that's not putting money in your pocket The Only Exception being your home"
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A rule for determining affordability: if one cannot afford to buy five units of an item, they cannot afford to buy one unit.
"if I can't buy five of them I can't afford one of them"
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For low-interest debts like mortgages or car loans, individuals can choose whether to prioritize paying them down or continue investing their money, depending on personal goals and risk tolerance.
"if you have low interest debts if you have things like a mortgage if you have things like a car note this is where you can also decide if it's worthwhile for you to pay down these debts or continue investing your money"
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Breaking free from generational poverty and paycheck-to-paycheck living starts with changing one's mindset about money, rather than solely focusing on increasing income.
"the first step to you becoming wealthy and breaking out of the cycle of living paycheck to paycheck... isn't to go out and ask for a raise... it's to change the way that you think about money"
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A fundamental belief in one's own ability to become wealthy is essential; without it, achieving wealth is impossible, as actions will be self-sabotaging.
"you have to believe number three that I will become wealthy... if you don't believe that you can become wealthy it's going to be impossible for you to actually do so"
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Emergency fund money should be strictly for unforeseen emergencies and not for down payments, investments, or purchases.
"this is not money you're supposed to use to use as a down payment as a car this is not money you're supposed to use on a new rental property... this is money to protect you against an emergency"
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Until an emergency fund of $2,000 is saved and all credit card debt is paid off, one should aggressively cut spending, including subscriptions like Netflix, to focus on financial stability.
"until you do this until you have these two things you should not be worried about spending money you should not be worried about what car you drive and you should not be worried about having a Netflix subscription"
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Dedicate two hours daily to financial education through classes, reading, or free content to learn about earning more and managing money.
"use these two hours a day to invest in your learning take classes read books do things to invest in your financial education"
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Investments in the stock market and real estate carry inherent risk, with no guarantee of returns, which can fluctuate higher or lower than expected.
"you're not guaranteed to make money in the stock market or with real estate sometimes the markets will go up sometimes it will go down you're not guaranteed to make 10% sometimes it's going to be higher sometimes it's going to be lower"
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Within 10 years (by April 2034), every company will integrate a media component for efficient product marketing.
"10 years from now every company is going to have a media component in it where now you're working to create the product but the second aspect is how do you actually Market the product at an efficient way that way now you can also get the product out there into the eyes of people without spending a ton of money to do that because nowadays media social media all these things are the backbone of how people absorb content and it's the backbone of how people find products"
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Money in a bank account earning 1% annual return will take 72 years to double.
"keeping your money in the bank is going to take you 72 years to double your money"
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Investing in the stock market at an 8% annual return will double money every 9 years.
"if you can grow your money by 8% a year in the stock market you can double your money every 9 years"
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Real estate investments earning a 7% annual cash-on-cash return will double in 10 years.
"if I get a 7% return on my money it's going to take me 10 years to double my money"
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Passively investing in the stock market can yield a 7% annual return over the long term, doubling money in 10 years.
"if now you take your money and you passively invest it into the stock market you can expect to get a 7% return on your money over the long term... which means it will take you 10 years to double your money"
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Actively investing to achieve a 10% annual return will allow money to double in 7 years.
"if you can get a 10% annual return on your money it's going to take you 7 years to double your money"
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Achieving a 20% annual return on investment will double money every 3.8 years.
"if you can get a 20% return on your money well now you can double your money every 3.8 years"
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Achieving a 50% annual return on investment will double money every 1.7 years.
"if you can get a 50% return on your money well now you can double your money every 1.7 years"
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Achieving a 500% annual return on investment will double money every 5 months (noting high risk associated with this level of return).
"if you're able to get a 5 100% return on your money but now you can see your money double every five months"
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Investing $4 a day for 45 years into the S&P 500 (assuming a 10% annual return) will result in $1.1 million from a $66,000 total investment.
"if you do this your $4 a day over the course of 45 years would have been just under $66,000 that you invested but because you're able to get this 10% annual return your money would have grown to $1.1 million"
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Investing $4 a day for 45 years into the S&P 500, with annual contributions increasing by 5%, and assuming a 10% annual return, will result in over $2.1 million.
"if you do that and you keep the same years you do this for 45 years you get the same 10% annual return well now you're not going to have 1.1 million you're going to have over $2.1 million"
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Investing $4 a day for 45 years, with annual contributions growing by 5% and reinvesting 4% cash flow (total 9% contribution growth), into investments earning 10% annually will result in over $4 million.
"you're still investing your $4 a day right now but every year you're working to increase your annual contribution by 5% you do this for 45 years you get a 10% return on your money but assuming that you can get 4% cash flow and you take that 4% cash flow and you put it in here now your annual contribution is going to be growing by 9% now you're not going to have $1.1 million you're not going to have $2.1 million but you're going to have more than $4 million in your investment fund"
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By April 28, 2034, every company will integrate a media component into its operations.
"10 years from now every company is going to have a media component in it"
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Consistently buying into the stock market, even during recessions and market crashes, will lead to building more wealth over time.
"what we've seen over the last century is that despite the recessions despite the market crashes if you just keep buying you will be able to build more wealth"
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Individuals who increase their income without first developing financial literacy are likely to increase their spending and worsen their financial situation.
"when people go out and earn more money without understanding what to do with that money they are more likely to go out and spend more money and end up in a bigger Financial hole than they were before"
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