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See what I'm saying? From what I'm seeing, after year 1, the portfolio had a return of 45%. Then it DROPPED back down to 25%.
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You are misunderstanding what that 11% number is. That 11% number is the annual return.
Your 27% number is the 'total return since you bought your investment', not the annual return.
The annual return on your investment was:
+45.0% in year one
-12.4% in year two
You lost money in year two. You did not gain 27% in year 2.
If your investment goes up by 25% per year for 10 years, how much will it be worth in 10 years?
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In the example I used in one of my above posts... let's say there was always this 25% gain on the portfolio. After 10 years I'd have $15,413. If I only have 6 different companies @ 10 shares each... then each share on average would have to be around $256.
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The actual price of shares is pretty meaningless.
Companies can sell fractional shares, merge shares, or split shares at will.
Traditionally a company will split its shares when the value of a single share gets too big.
So you start with 10 shares @ 40$ per share share.
Every year it increases in value by 25%.
Year 0: 10 shares @ 40$
Year 1: 10 shares @ 50$
Year 2: 10 shares @ 62.5$
Year 3: 10 shares @ 72.125$
Year 4: 10 shares @ 97.66$
Year 5: 10 shares @ 122.07$
at this point, the company says "hmm, 122$ per share is silly. Lets split our stock!
Year 5: 20 shares @ 61.03$
Year 6: 20 shares @ 76.29$
Year 7: 20 shares @ 95.37$
Year 8: 20 shares @ 119.21$
damnit, shares cost too much again. This time they do a 3 way split on shares.
Year 8: 60 shares @ 39.74$
Year 9: 60 shares @ 49.67$
Year 10: 60 shares @ 62.09$
How much is your investment worth after 10 years?
400$ initial investment, compounded at 25% annually:
400$ * 1.25^10 = 3725.29$
When shares split 3 ways, you get 3 times as many shares, that are each worth 1/3 as much.
Lastly, 25% return per year is not anything you are going to get.
First of all, you want to look at
after inflation returns. You can get a 25% return if there is 24% inflation. =-) But that doesn't do much good, because your money gets worthless as fast as you earn more of it!
Second, unless you have a super sekret trick, you should not expect to get much more than a few % over inflation. Like 2% over inflation.
So, 20,000$, at 2% after inflation, will grow to 29,719$ inflation-adjusted dollars in 20 years.
Assuming a nice slow average inflation of 4% over those 20 years, that will end up being 65,118$ in paper money -- but paper money will be worth 2.2 times less in 20 years, so it will have the buying power of 29,719$.
Lets suppose you get a really good investment that returns 4% over inflation for 20 years. Then your 20,000$ turns into 43822$ (inflation-adjusted) or 96k$ in paper money.
Going from 2% to 4% upped your return of your investment from under 10k$ to over 23k$.