By:EarlyInvestor
My first post-8/21/22 Compounding
Hi, I am a 10 year old kid. Besides school, I am interested in learning more about investing. I want to learn how to invest in public and private markets and also exchange my thoughts with others who have similar interests as mine. I am interested in investing and want to learn more about itbecause I find it so fascinating that we can easily invest our money. For my first post, I will be giving examples of about the power of compound interest to exchange my point of view about compound interest. When I was reading a book titled "How To Turn $100 Into $1M about investing by James Mckenna, Jeannine Glista, and Matt Fontaine. I was asked the question would you rather have $1M or a penny doubling every day for a month. After doing some math, I arrived at a penny doubling every day for a month = a whopping $5,368,709.12. This is how I first got fascinated with compound interest. This is a 100% compound rate and is also per day instead of usually per year. This is a very rare case and not realistic. A great rate for compound interest doesn’t have to be 100% compounded every day. That’s why compound interest is so powerful. Some ways you can compound money are high-yielding saving accounts, bonds, dividend stocks, and money market accounts. Compound interest won’t always work in your favor. But you can limit the amount of times it doesn’t and you can by a lot. A very common example of it working against you is loading up on credit card debt. You have 30 days, and after those thirty days if you don’t pay the money it’ll start compounding at approximately 20% annually or approximately 1.66% per month. A way to avoid paying compound interest is by not making purchases that you know you won’t able to pay the amount borrowed within thirty days. I am mainly writing this blog for these reasons. 1. To exchange my thoughts and point of view about investing money with others. 2. Learn more about investing. 3. Be able to invest good businesses that can compound my money.I hope to exchange my point of view with other kids around the world and be able to articulate my thoughts about investing and get feedback, ideas and push back against my thoughts and views on investing. I also hope to increase my investing skills, IQ, and knowledge. I got interested in investing by watching a lot of Shark Tank Episodes. I also find it fascinating how I can multiply/compound money I’ve gotten from allowance and birthday gifts so I don’t take on student loans when I go to college. During debate class I’ve learned the cons of student debt and what it does to young adults. Some other interests that I have are, soccer, basketball, debate, and chess. For now, I plan to stay anonymous.
My Second Post-9/11/22
The Compounding of The S&P
Hi, this is my second post which will be about the S&P 500 ETF Trust. I got money for my birthday, and I put it in a bank account. Given my last post about compounding, I wanted to see if I can compound my principal at a higher rate than a back account will. I will talk about when and how this company started, what is it, and its compounded annual growth rate. The S&P is known as the SPY. It is a conglomerate constructed of 500 U.S. based companies. A conglomerate consists of companies and different stocks and is a basically a portfolio. This is a very good stock for beginner investors, because it has a low risk rate. It does because its very unlikely at least 50% of the companies crash. But then at the same time, you most likely won’t get skyrocketing results. because it’s a very low chance of 250 stocks skyrocketing. Now I will talk about how the company has been doing and the return rates along with the Compounding annual growth rates. I will give three random year times and its compounded annual growth rates. 1967-1974: -4.76%1979-1990: 10.70%2008-2020: 12.61%
Compounded annual growth rate is very important. It helps us know very accurately how a business is doing. In these cases SPY is doing good mostly because 12 and 10 percent are good for a big business made up of 500 companies. It wasn’t doing that great when it started though, because its CAGR is a 5 percent decrease. Over a period of 60 years the SPY increased from 60 dollars to 4750. That is approximately 7.5% CAGR. Thank you for reading my second post, and my third post will come soon.

SVB Collapse 04/09/23

Introduction: Silicon Valley Bank (SVB) failed recently. It went bankrupt as they didn’t have enough money to repay their lenders, who happen to be individuals. Many such individuals took their money out of their saving and checking accounts in their small banks for fear of not being able to access their money due to a bank fail. Since the collapse of SVB, small banks lost at least a total of $108 billion dollars in deposits as these individuals put it into larger, more secure banks like Bank of America. So, the Silicon Valley Bank failure has a major impact on small banks. Because SVB failed/went bankrupt SVB now can’t offer loans to companies like it did in the past having an impact on the companies which took loans from SVB therefore impacting the local economy. Background: Here is background info on SVB. Roger V. Smith founded Silicon Valley Bank in October 1983. It grew with the local high-tech economy and saw its net income go from a loss of $39,000 in 1985 to a gain to $12.3 million in 1991. In 1986, it moved to Santa Clara. I think the reason they were successful was because they had a geographic competitive advantage. They had more customers, resources, and advantages as Santa Clara, a hub for tech companies/Silicon Valley, was wealthier than rural areas like Mississippi. Subsequent Events: A chain reaction caused SVB to fail. First off, they had poor risk-management. SVB invested in bonds (loans). So, when the federal interest rates went up their bond values went down as bonds decline when interest go up and the opposite happens when interest go down. SVB announced on March 8. when they sold their securities, they made a loss and attempted to sell $2.25 billion in new shares to compensate for the loss. As a result, it worried venture capital firms (companies which invest their money into small businesses in their early stages) and then they advised their companies and people to withdraw their money from SVB further accelerating the problem. It happened so fast as the company couldn’t last for more than five hours as people were rushing to withdraw their money from the bank. That’s why SVB failed. I am concluding my post about the SVB failure. Hope you liked it and stay tuned for more posts.