A programmer and his money.
Coder with money. It's a toxic relationship.
Programmers usually earn good money. But their relationship with money is very toxic. They usually have no idea what to do with all this money which they get every month. Money always says you save me today I will save you tomorrow.
- Programmer can write a very beautiful sexy and hot code for a wall street firm that might be managing billions of money for their clients. But a coder is very alien to the rule of 72. They don't understand all the fancy jargon of those financial advisors. So today I will tell you how to invest your own money and be ready for times like COVID in the future.
First, understand the rule of 72. If you earn 1% interest on your money every year then it will take approximately 72 years to double your principal. if you earn 15% then it will take approximately 5 years to double your money. So basically all you have to do is divide 72 by your interest rate. That's easy peasy. So now calculate how many years it will take to double your savings account. Usually in the USA interest rates are very low some time it approaches zero like it did in 2008. Ten year Treasury bill is also very low. Usually, Treasury bill rates and savings rates move in tandem.
So it was all about how many years it will take to double your money now let's talk about where to invest. The first thing that usually comes to mind is the stock market. I will suggest YES and NO. First I will tell you why NO. If you have no idea what the stock market is how it works then you will usually lose most of your money if you invest directly in the stock market. If you have a little bit of an idea of what a stock market is still you will book loss. So here is a clear strategy for all of you. This is the strategy that I personally follow.
First never go for mutual funds, hedge funds, and a BIG NO to direct stocks. No to Robinhood trades. Our sole and only goal here is to preserve all the money which we save and let it compound slowly at a respectable rate of return.
So go for a broad market index fund. In the USA it is the S&P 500. Vanguard S&P 500 scheme will give you the top 500 US companies return by market-weighted. Market weighted is fancy jargon. I will discuss it in upcoming articles. But as of now, the last ten years' return of the S&P 500 is 11%. Way above than T-bill and savings return. Now calculate how many years it will take to double. This ride was very turbulent. Full of horror stories in between. But in long term, it ends well. And it beats 95% of money managers around the world. No investment advisor can beat the market return consistently. Indexing your money is a brilliant idea. So start saving and start indexing to enjoy the fruit in your later life. If you like this article please do share and like it. Happy coding and happy investing.