Welcome to week one of the Husky Investment Tournament! Teams from Florida, Maryland, and right here in Michigan are joining the experience. Ready to get started?
Let’s start by comparing two people and their investing habits, assuming a seven-percent annual return on the stock market:
Beth starts investing at the age of 18 and contributes $2,000 a year until she reaches age 40. Beth’s friend Jo waits to start investing until age 40 and contributes $5,000 each year until reaching age 60.
Who do you think will end up with more money at age 70?
Beth would have contributed $44,000 of her own money and by the time she reached age 70, there would be $531,950.70 sitting in her investment account. On the other hand, her friend Jo would have contributed $100,000 and there would be only $403,221.69 sitting in an investment account.
This example illustrates the power of time and compound interest. If you were to start at age 18 to achieve millionaire status by age 60 you would need to invest $4,335.91 a year. This number equates to $361 a month or roughly $90 a week!
As Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
The College of Business at Michigan Technological University wants you to understand the basics of stock investing now, while you’re young. People naturally avoid things they don’t understand. We want you to understand that investing isn’t as complex as it may appear. In the Husky Investment Tournament, only one team will finish in first place, but all of you can win in the retirement tournament.
This week’s video is from Dean Johnson, dean of the MTU College of Business. He provides an introduction into stocks and investing to help get you started, as well as an explanation of rules and trading restrictions.
Good luck, and have fun!