The World Series just wrapped up last week, another season in the books. To use a baseball analogy, you don’t need to hit a bunch of homeruns in investing. Base hits get the job done too.
Homeruns and Base Hits
A homerun is buying the blue chip stock early and watching it grow by 2,000 percent or some crazy number like that. These stocks and opportunities exist, but how do we know that they are and when to buy them?
Most people don’t have the expertise to answer these questions. Plus, you’re competing with professionals who spend hundreds of hours researching these types of companies, and buy them before you.
Doable? Yes, but the odds are stacked against you. You’re playing a game you’re not likely to win.
A base hit isn’t as fun or exciting. It’s investing in an index fund and watching it average 10 percent growth. Or buying a cash flowing rental property and slowly accumulating a few hundred dollars every month, and reinvesting the gains.
You Will Win With Base Hits
You will win with base hits. They are predictable, and over time they add up and compound. A solid base hit every month for multiple years compounds to unrecognizable growth.
For example, someone who invests $500 every month at a 10 percent return would only have $6,600 in one year. In five years they’d have $40,294. But at 20 years they would have $378,015. And $1,085,661 in 30 years.
The numbers keep going up and up because of compound interest. Even though this particular investor never contributed more than $500 in any given month.
So don’t be discouraged if you feel like the process is slow, that’s the way compounding works. Small progress over time leads to exponential results.
Keep with it and let the base hits keep on coming. Eventually the runs will score, and score, and keep on scoring.
