We finally made it.  September 15, 2016.  We had been eyeing this date for 22 years!

Back on July 7, 1994, while searching for a suitable investment for our then 52 year old clients, we stumbled across a fascinating bond;  a zero coupon (pays interest at maturity) Mississippi tax free bond. For an investment of $16,323, the bond promised to return $70,000 on September 15, 2016.  Back in 1994, 2016 seemed a long way away (like looking out to the year 2038 today).  But time passes quickly, doesn’t it?  Last week, on September 15th, our client‘s account was credited with $70,000!  Their money more than quadrupled in this 22 year period.  In case you are wondering, the rate of return was 6.8% tax free which for them equates to a taxable return in excess of 11%.

Today, of course, no such yields are available.  So what is the take away from this story?  For us, it is a real life illustration of the power of compound interest.  Many of us will be pleased if our investments, like this bond, grow at 6.8% over time.  This is certainly not an unrealistic expectation for a portfolio of 60-70% equities.  At 6.8%, money doubles approximately every 10 years. So investors need to understand the power of compound interest and practice some patience as we watch out money grow.

Recent Posts

Happy Veterans Day-A Tribute to My Grandfather

On Veteran's Day, I am reminded of the life of my maternal grandfather, Joesph Thomas Dickerson. At age 17, so anxious was he to defend his country during WW I that he fibbed about his age and enlisted.  By age 18, he had become a regimental sargent major, the highest...

read more

What Does President Trump Mean For Investors?

How political parties affect the markets and the economy Now that the 2016 presidential election is over and we can refer to Donald Trump as President Trump, it’s time to examine some additional questions. More specifically, how will President Trump affect markets and...

read more

Pin It on Pinterest