The Importance of Capital

The Importance of Capital

An investment cycle of 2025 comes to a close at the end of May. Indexes tell you about stocks: the Dow Jones Industrial Average, the Standard & Poor’s 500 Averages and NASDAQ and others.  They tell you what stock prices have been over time periods.  As you know, there has been volatility and it is normal.  Don’t let the media or friends talk you into believing that terrible events are about to occur.  It is time to become accustomed to seeing, recognizing and believing in good news and good times and understanding the ability of people to live and grow through difficult times.

Currently, the truth is that those 3 indexes are flat between -1% and 1% for the year as of today, May 20.  That should not seem like a lot to you.  In addition, those indexes are up between 14 and 19% per year for the last 5 years.  And the stock market is up, not every year, but when looking at the longer term.  Be an investor, and you can be happy!  Keep it simple and good.

You can find scare stories about social security.  It is likely to be a part of your benefits but not to be depended on.  No matter how you might criticize the program, you are not able to cause any changes.  The same is true of company retirement programs; your control and good returns come from your knowledge.  You have choices regarding your planning and we can explain the results of choices. The truth is you can plan and invest to have sufficient capital to last through your retirement.

It is important to think of your investments as capital not savings.  Savings is a number like $20,000 that is available for the unexpected expenses that occur each year.  You decide  how much and most people keep that money in a savings account of some type.  It is also important not to leave too much in savings accounts because money that will enlarge your capital must be invested to earn a higher rate of return.

Capital should be your goal.  Some people save all the capital they need to live on in retirement. Each month their capital pays them an income.  Those people have chosen to invest for economic freedom; they take money regularly, probably monthly, and they expect the capital to continue growing.

We spend our time finding the accounts managed by people who make decisions that value consistent performance.  These are the numbers of an account that we use with permission and which has grown, worked and paid out to others on a regular basis. The account shall remain unnamed in this newsletter but you can come in and ask us for additional information. Over the past 18 years, $5.5 million (rounded) was invested in this account. The holder also paid out $2.4 million including taxes.  Do the math and observe the account was worth 5.9 million (rounded) on the 25th of April, 2025. Can you live withdrawing 6% of that account each year?  I can.

Are you a small investor?  Starting in 1978 and adding $100 each month would have meant you invested $50,000 over approximately 46 years and you would have an account worth about 1.1 million now (assuming 10% interest).  It is not the money that is important, it is the income that you can withdraw each month knowing you have enough capital to ignore scare stories..

We like simple and successful!

Sincerely yours,

Posted on May 22, 2025 by Googins Advisors - Newsletter