February 24, 2020
My Dear Reader,
Stocks are through the floor today, and no one could have predicted it. It’s the nature of the market of course, but try telling that to those who have invested their retirement into the market. There are many angles with which we could approach this, both socially, emotionally, and logically. But for now, we’ll stick with the logic. 1000 points or more snot only a huge loss for the day, but in the future it will truly cost the average American much more than they expect. This is because of a principle known as opportunity cost.
Opportunity cost is seldom explained by the financial community. If your financial adviser has already explained this to you, or you know what it means, thank him or yourself; not understanding it can cost you hundreds of thousands of dollars over your lifetime. The basic premise is that every dollar you spend today could have been invested to yield increasingly more money over time. This is a sobering fact: every dollar spent today will never again be able to work in your favor. For in-stance, $100 invested today at the market average rate of return of 7.91 percent will be worth about $1,000 in thirty years. So, every payment made today with your own dollars hurts you in the future. This is why excessive taxation, especially personal income tax, is so harmful to all levels of society. USA Today estimates that the average American pays roughly $10,000 in personal taxes per year.1 If we use this number and apply the current market average rate of return of 7.91 percent, that one year’s payment of $10,000 costs $96,463 thirty years later.
My point here is that Americans today lost money that they will never be able to recover, but Wall Street still got their fee, didn’t they? Simply Food For Thought today, but I still want to make a point very clear that the financial industry institutions are based on nothing but smoke and mirrors.
To your creation and potential,