Staying tuned. Sounds interesting!

This is from ole joyful.

There's an investment advisory magazine in Canada called "Canadian Moneysaver" that quite a number of years ago proposed that subscribers get together for discussions with others in their neighbourhood.

Each of about nine issues per year has a list of about 35 places where there are such meetings, e.g.."Ont" "London' then a person"s name and phone no. or email address, to learn location and time of local meeting, usually pretty well monthly through most of the year.

I attended for a number of years, till my car died, and got to know a number of members quite well, including the overseer, who became a friend. He may be in his sixties, was recently diagnosed with cancer.

Knowing that the magazine was/is important in his life, I suggested that he write an article to submit about this legacy, for if they ran such an article of his, I'm sure it would warm his heart. So far he has demurred - "Who's going to be around in 100+ years to benefit?"! A mutual fund suggests that I persist for a while: I think that likely I will.

ole joyful

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A quick calculation shows that $100 producing an 8% return compounded monthly (unlikely to achieve with a cash investment) is worth less than $300,000 in 100 years. Unadjusted for inflation.

I'm not sure what this idea is intended to accomplish. I doubt an heir would be willing to fork out their own money to pay tax on the income of a growing balance they're requested to not touch. If tax money is taken out of the balance, the residual value is also reduced. In Canada as an example, if the assets were invested in a mutual fund where the return is in large part the appreciation of underlying shares held by the fund, the owner's death is treated as a deemed sale of appreciated assets and capital gain tax is due.

Normally, assets inherited from a decedent happen with no legally binding strings attached. In my experience with such things (work I did only of limited duration during my career as a tax adviser), assets passing along with any circumstances or stipulations an heir wasn't like-minded about would be disclaimed. What that means is, "thanks but no thanks", the right to such assets would be waved.

I never encountered a client or acquaintance/friend whose wealth or nest egg accumulation was built through fortuitous investment results. It's an attitude as unlikely to be successful as trying to do so by buying lottery tickets.

I haven't read about this. Just want to add a warning about any Directives from beyond the grave.

O.K., - I agree, chisue.

So I'd better tell the story soon, having observed my 9696th birthday last month.

I hate- well, dislike, being forced to delete so much extra material whenever onone tries to make amendments here.

But - I'd just written this , not even a thought of amending ... and now it just isn't in me to amend this one!

But - only pay attention to the first two numbers (or, last two, if you prefer) folks, please.

ole joyful

This is ole joyful again.

About a month ago while listening to CBC, our national radio, I heard a program with people who deal with seniors. A number of topics were discussed, and one piqued my interest. When one participant suggested that soon someone would live to be 150, several thought that it wouldn't happen anytime soon and when one said that he thought it might well happen in our generation, there was lively discussion and when it became rather heated, someone suggested that they have a wager on the issue. They agreed that each participant would invest $100. at 10% rate of return, and the timeframe was to be 150 years. I don"t know how many participated, the numbers on each side, or whether the one suggesting that 150 year lifespan had to cover several bets.

This was a lively seed that planted itself in my brain and began to grow.

Wouldn't this be a great way to start a family legacy?

When each grandchild is born, grandparents invest $100., seeking as close to 10% rate of growth that they can find - and they spend time learning how to achieve such with reasonable safety.

As the children grow, they are taught that this money, likely held in joint account with parents to survive intact the grandparents' death, and not a large amount after those few years to grow, it's a family legacy, to be given to them as they become adults. While they can use it during their lifetimes, this is not their money, it is family money - a family legacy to support the family through many generations. They must pass on the amount that they received to the family, likely usually their children. If they use some of the money during their lifetimes, they must consider it an obligation to replace it later, and make an earnest effort to add some growth, to replace the growth that the fund would have generated if left undisturbed. There will be ongoing costs involved, likely including income tax on the legacy's current income(1), plus loss in value due to inflation.

As the original recipient ages, if there are offspring, it seems to me that near or at the end of life, the legacy should be divided equally among the offspring.

Plus- as the original recipient accumulates grandkids - he's supposed to start a new legacy account for each.

No doubt you readers will have some ideas to offer. I wonder what they may be.

1. Unless they're Canadians, with a Tax Free Savings Account, that attracts no income tax on either current income or asset on liquidation.

ole joyful

invest $100. at 10% rate of return

Where was that magical investment meant to happen? Earning 10% for over a century? I can't even earn 5% over one year.

HU........464, what you mention as the outcome of action following the "heated" discussion makes no sense. No more than when two drunks argue with braggadocio and agree to resolve their differences in some bizarre way. Which the next morning's sobriety will bring to an end.

What's the objective of what you say is proposed?

ole joyful here again - under a different name, no longer just a number. UUnUnfUnfoUnforUnfortUnfortuUnfortunUnfortunaUnfortunatUnfortunateUnfortunatelUnfortunately they didn't offer info on how to get it.

ETA: In the "...how to get it.", the "it" meant "that rate of return"./

AROUND THIS PLACE - DON'T TRY TO EDIT LATER!!!

And I was somewhat sceptical, myself- but I liked the basic story.

When visiting my credit union the other day, it was not busy, and when I told this story to the teller, he put "100 + 10%" into his machine ...

... and pressed the "go" button 100 times.

The result - 1,300,000.

As Elmer said - at 8% the result at 100 is under $300,000.

Even allowing for erosion at the hands of the several caretakers, or income tax (if you're a non-Canadian, with some choices) or the depradations of inflation - that's still a fairly impressive potential growth from such a modest investment, it appears to me.

ole joyful

Your original premise, of putting $100 into an account to grow over time by compounded interest, is nothing more than basic compounded interest. Finance 101. The math is sometimes called the Rule of 72. Any and all interest-bearing accounts or loans with other than simple interest on the principal amount do this and have for hundreds of years.

The math of your original premise is a different and inconsistent calculation from what you report was done at your credit union visit, that's why the result is wrong. Just under $300K gross is the correct result

If your wonderment is because you've just discovered how compounded interest works, fine. Otherwise, I don't get what you're trying to say.

As far as investment strategy is concerned, having an investment in a variable rate deposit account (which is what one gets other than on a short term basis since rates change) is an inferior way to invest for the future. Almost any other conventional choice will outperform a savings account.

" that's still a fairly impressive potential growth from such a modest investment, it appears to me. "

Yes, it is - however unrealistic it is (10% interest for 100 years). There are multiple "compound interest calculators" on line, but some have limits as to the number of years or interest rate.

OJ...... Your friend with the $100 advice is maybe a little off on his numbers and strategy.

Maybe you'd enjoy reading a book by Tony Robbins...? A lot of what he says is just everyday inspirational advice, so as not to get discouraged. He's a success story. I think you might enjoy him. Link

nicole, Tony Robbins is a media darling, not a real financial guru. He's as likely to be invited to speak at legitimate seminar for financial sector experts as would be Charles Ponzi.

For food, yes of course, the interest rate matters. You could show that $100 grows into $250 million using an X% rate and Y years but that along with the 10% that began the thread are equally unlikely. Try seeing 10% consistently over 10 years in a diversified portfolio - it doesn't happen. Other than the denizens of the high risk neighborhood of the investing world whose returns either hit the stratosphere or are negative , most advisers and managers neither present nor tout anything near that that as an expectation.

The best financial advisers I ever came across was a group of guys who specialize in high-net-worth individuals here in Silicon Valley. Some of their clients had inherited wealth but otherwise, it was successful VCs and founders of blockbuster companies who formed their client base. They also had portions of endowments of several well known universities.

The partners were all either Stanford or Harvard MBAs (good for marketing) and had Wall Street experience. They were hands on, fee-only based private portfolio managers. Minimum size to entrust to them when opening a new account was $10 million.

Their commitment was to offer active, informed and prudent management of the money given them with only two goals - diversification for safety and a rate of return that beat inflation. No speculation, no swinging for the fences. Even from a client base drawn from those who were fearless (or at least quietly neurotic) gamblers, they had more business than they could handle.

Thank you, food: it seems that I should have checked that growth amount using 8%, but I thought that in these financial issues, Elmer's figures would likely be dependable.

So - it turns out that the actual amount is only a hair under 20% of the way from $200,000. to $300,000., a substantial difference.

Few of us begin investing at birth, which is the best time to start, according to many financial advisors, as one of the major issues is to do it over a long term, and this plan would do that.

I was concerned that the first holder might become so disappointed by the meagre growth in the early years that s/he might choose to discontinue it, so it would be important to emphasize in the training the major growth that'll develop in later generations when the original stewards persist.

This is to be an investment to persist over a long term and I think that I spoke of growth and investing rather than interest.

A substantial number of quality companies have increased the amount of dividends that they pay every year for fifteen or twenty years, or more, a few, called Dividend Aristocrats for 50 years. The price of the shares usually move proportionately.

ole joyful

Elmer...Exactly. I think OJ needs to be pointed in a different direction. He likes a good story. An inspirational speaker. Who better than Tony Robbins! Tony is a "friend".

Very clever suggestion!

Elmer, I realize that getting a consistent 10% is quite unlikely and certainly not guaranteed. But that’s the number that OJ used just as 8% is the number you happened to use. His calculation was not wrong as you charged, it was just unrealistic.

The real way to build a family legacy: Raise your children well (which means being more involved than the average parent today). Read to them, take them to museums and places of cultural interest. Talk to them -- just talk to them. Work jigsaw puzzles and logic puzzles together. Sit down to a screen-free table every night for dinner and ask your kids about their day. Yes, all this even when you're tired. Save and put them through college -- and make it clear they're to repeat all this for the next generation.

THAT is your legacy.

food, I think this isn't the first time you've approached a nuanced question thinking the result can be obtained with simple math using a pencil and paper.

I'm trying (without that much success) to shorten my responses. I will never convey to you or anyone else what my decades of professional practice have led me to know and understand, and I'm CERTAIN that the same is true about you and everyone else vis a vis others.

I was responding to a proposition from what seemed an uninformed person. I'll make it simple for you - a 10% sustained return is unobtainable for an ordinary person and even if it were, taxation of various kinds and other effects would reduce it substantially over the long term. So take 10%, reduce it by 20% (a bare minimum amount), and you get 8%. It's no more complicated than that. That's why the proposed answer was wrong and I probably could have expressed myself better.

My responses and I assume everyone else's are conversational. Off the cuff. When people do anything more than respond at that point of time with a top of the head reaction, they usually say so. My perhaps unclear and mistaken effort to quickly point out the error can be a criticism of my explanation, not the overall conclusion. The premise of the thread was wrong for many reasons, unrealistic, and extremely unlikely to happen in the way described

I tbink multiple posters brought up the premise was unrealistic, mentioned tax implications, etc. without saying the calculation was wrong. Doesn’t take a lot of words. Now if you can tell me where I can net 8% after tax consistently, I’m all ears!

"Doesn't take a lot of words" is better but difficult for me.

Stick to the advice given by the All Star team I mentioned above - have a diversified portfolio, try to stay even with broad measured growth (index funds are great for that), and don't try to swing for the fences. People who do usually strike out more than necessary. If you do better than broad-based measures, you were lucky, not smart.

ole joyful on deck, again folks.

I made small reference to the story that I heard on the radio in the original post, in the beginning, wanting to suggest that it got me thinking - about such a method of starting early being a great way to start investing, and a long term encouraging starting to a family legacy.

It was unfortunate that I appeared to be so substantially committed to that dratted 10%, because I felt that it was rather improbable to be the net ongoing rate of return, which was what counted over the long term.

In my second story I told of knowing a person who'd become a friend, who was overseer of the local gathering, one of about 35 nation-wide, of "Canadian Moneysaver" a financial guiide magazine, and suggesting that he write an article about building a family legacy, to see whether the magazine might print it, which would please him, a man getting up in years and coping with cancer.

I had reservations about the rate of growth contemplated in the original and did make some reference to issues which would shrink it, e.g income tax, erosion due to inflation and some of the holders over the years maybe keeping some of the legacy while in their hands.

I suggested that the grandparents and parents guide the child who is to get the original investment as s/he gets to adulthood, to learn to manage it well and be committed to passing it on.

I made suggestions as to how it might be divided as the original recipient neared the end of life - more emphasis that this is to build a family legacy.

The original steward may become discouraged, as compounding grows slowly in the early years, and that original $100. won't appear very impressive, after 30, 50 and 70 years of partially eroded growth.

Do you think that the investor might hope to achieve a net growth rate of 4%? It may grow as follows:

1 year $104.

- 2 years $108.16 .

- 3 years $112.48

- 4 years $116.95

- 5 years $121.665

- 6 years $126.53

- 7 years $131.59

- 8 years $136.85

- 9 years $142.33

10 years $148.02

- - - 18 years $202.52

20 years $219.11

25 years$266.58

30 years $324.33

- - - 36 years$410.39

50 years $710.668

- - - 54 years $831.38

75 years $1,894.525

100 years $5,050.49

Note the rule of 72: at 4% estimated rate of growth, note that "72/4=18", at 4%, money will double in 18 years: at 8% it takes 9 years..

To find growth rates if you estimate probable 3% net rate of return, enter "100 + 3%" into your calculator and push "=" once for each of the number of years you choose.

ole joyful