What should you know?
Many of you will be receiving bonus payments during April.
Annual bonus time is a moment many of us look forward to with excitement and anticipation. The question is “what should you do with it”?
The chart below shows how a person who invested their US$10,000 bonus 30 years ago would sit today:
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- Despite all the various moments of concern along the way, a person who invested their bonus in the S&P 500 30 years ago would have seen it grow to nearly 16x its value.
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Why should you care?
For the last century, investing in equities has consistently produced compound returns 3 times greater than inflation.
You can only spend money once. You could spend this year’s bonus on short-term gratification. Alternatively, you can exchange it for income and security in the future. With history as our guide, $10,000 could be worth more than US$150,000 in 30 years! That would buy many times more than $10,000 can today.
Place as much of your bonus as possible into your investment account or pension and repeat this step every year, throughout your career.
As the years pass, you will start to see this compound in value and in turn, bring your financial independence date closer.
