Cannon Financial Institute

Capital Ideas - March 2016


This Issue features pieces on Fixed Income Investors, Roth IRAs, and Financial Aid. 



OK, I admit it. I love centerfolds. That does not sound so good, does it? Please don't mention this to my wife, daughter, grandchildren and especially not my mother! I don't want them to think I've become a dirty old man. It's just something I felt I had to get off my chest. I can't wait to get the mail everyday and when I've gotten home from a long business trip I tear through the mail just to find one of these beauties waiting for me. The feel of the paper, the colors of the images, the words on the page - wait? - the words on the page?

Alright, it's not what you were thinking! Keep your minds out of the gutter, please. It's the multi-folded centerfold of my favorite mutual fund annual reports. It's actually called a mountain chart. I just love seeing the graphs that indicate the growth of the funds. The graphs start low and then over the course of several years, rise to new and greater heights of return on your investments. Granted, there are some time-frames where the mountain becomes a valley, but I'm not talking about those. Every fund has mountains and valleys, but it's the ones that keep rising to the top of the page that intrigue me.

For example, one of my favorite funds is The Investment Company of America. If you had invested $10,000 in 1934 (sure wish I had been able to do that, but then again I really don't want to be that old!) and not touched it for 82 years, letting your earnings accumulate and be reinvested, you would have $107,719,552 by 2015. That's a 3.1% income return and an 8.9% capital return equaling a 12.0% total annual return. WOW! That's pretty impressive.

I keep telling my wife about the power of compounding and why it's important not to touch our investments. Sometimes I think she just hears "yadda, yadda, yadda", but after showing her the mountain chart, I think she finally gets it! I think I actually saw dollar signs in her eyes. She was so impressed by it, she's hung it on the wall behind her computer so she can look at it often. Now I need to work on our daughter and her kids.

This is not the easiest thing to teach people. Most of us want to spend what we have on all those things we want, but do not really need. It's hard to be disciplined enough to take your hard earned money and invest it and then let it be. There is always something pulling at you to keep the money out and use it as you want for bigger toys or need for home repairs and such. Staying the course is not easy, but it can be done and can be very profitable for you in the long haul.

I challenge each of you to take a certain amount of money and invest it in something you've researched and trust and leave it alone. We'll talk again in 82 years and see how your investment has grown!

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