By Jeffery Watson
Time can be the investor’s greatest ally or the procrastinator’s worst enemy. Across America, thousands of baby boomers are waking up and realizing they have not used time to their advantage in building wealth and saving for retirement. In my Roth Theorem, the Enhanced Rate of Interest (EROI) over a long period of Time (T) is a tool that works to build wealth for you.
I often speak to investors who have what I refer to as “one-hit wonders.” They have been able to put some money to work for a time making a 15-18% rate of return on it, but the length of time the money was out working was measured in months rather than in years. Compare that to another client of mine who very deliberately and calculatingly worked on an investment to have his self-directed retirement funds earning approximately a 15% rate of return for the next dozen years. The amount of money he put to work in that transaction was sizeable, nearly a 6-figure sum. That client understood the importance of getting time to work in conjunction with the enhanced rate of return to generate the type of wealth building he was seeking.
Time has been written about in many different ways in literature, in both negative and positive contexts. When it comes to investing, I want you to think about how to make time an ally, something that works for you, by using it to put money to work in good investments earning an enhanced rate of interest (EROI), and then letting those investments move forward with earning you more capital to deploy into new deals. You may want to stagger the dates of maturity of your various investments so you always have most of your money out working.
One of the best time management techniques I’ve seen is from an investor who has a “waiting list” of good opportunities and investments. As his money comes back from his deals, he puts it back to work relatively quickly in deals that are working for 18-24 months at a time. This allows that investor to consistently work his money while keeping it diversified and actively working.
Think about how you can make time an ally in your overall investing strategies. If you feel you are short of time and retirement is rapidly approaching, or you may need to work beyond age 65 or 67 to accumulate more wealth to be able to retire, please remember not to sacrifice the quality of your investments in an attempt to get an unusually high rate of return.