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When the Bubble Bursts. Hilliard MacBeth
Читать онлайн.Название When the Bubble Bursts
Год выпуска 0
isbn 9781459729827
Автор произведения Hilliard MacBeth
Жанр Недвижимость
Издательство Ingram
My boomer peers who have prodded and helped their offspring to get on the mortgage-payment treadmill may be worried that the millennials in their family would just blow the extra money. However, the message that sends to the younger generation is this: I don’t trust you to do the right thing so I’m going to try and control what you do. My point of view is different. If you let them have lots of leeway in making their own decisions you send them a better message. You are telling them that you believe in them; that you are sure that they will succeed and you trust them. Two very different messages to send. Of course, it’s not to say that you aren’t holding your breath sometimes as you watch them make their way in life.
But let’s assume that these renters are careful to invest that extra money in a balanced portfolio of stocks, GICs (guaranteed investment certificates), and government bonds. Assume also that the investment portfolio earns a return of 5 percent per year after fees, which is lower than the returns experienced in the stock market over the longer term. For example, in 2012 and 2013 the U.S. stock market returned 25 percent per year for two years in a row, plus dividends of 2 or 3 percent. But let’s use 5 percent to be conservative in our assumptions.
At $1,000 per month invested at 5 percent, assuming that the new money is only invested at the end of each year, the investment portfolio would grow to $572,700 by the end of twenty-five years. That is savings of $12,000 per year for twenty-five years, or $300,000, plus the return of 5 percent per year. The return includes all dividends and interest that the investment portfolio produced, based on the assumed rate of return.
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