Without you, they’re just diamonds..

Without you, they’re just diamonds..

Investment clients typically answer my ‘How are you so successful?’ question around two things:

They actively practice an ‘abundance mindset’ which is described as a ‘psychological bias towards positivity’ and, often as student of Warren Buffet, they have a detailed understanding of the ‘magic of compound interest’

Exponential growth and compounding are closely related but differ in context and application. To illustrate the principle:

Imagine taking, say, 30 linear steps (1,2,3,4 etc) and you can picture roughly where you would end up

Now imagine taking 30 exponential steps (1,2,4,8,16, and so on). Like to know how far 30 exponential steps will take you.? Around planet Earth, approximately 26 times!

The principle is well illustrated using John Becher’s ‘lily pond concept’

Imagine a large pond with one lily pad, which multiplies exponentially, covering the entire pond in 3 years

Every month, the number of lily pads doubles, so that the pond is covered in 36 months

Got it? OK, so, when is the pond half full with lily pads? The most common answer is ‘after 18 months’

The right answer is, after 35 months- because it doubles the next month.. It’s straightforward enough, but human brains don’t always grasp it

These principles are very important in investment and taxation

The more successful you are, the more money you make, the more tax you pay, and tax is most always the biggest bottom line cost

Of course, none of that matters if you create your investment or property portfolio in a retirement structure which is either not subject to tax, or pays tax at a future time, of your choosing

Maybe you want that too? Arrange your FREE power-hour discussion here. You’re free to accept, or refuse, and there’s no obligation whatsoever

Toodle Pip