Compound interest: How to turn $1 into $10

What's up you guys? It's Graham here. Since today, I'm going to be telling you guys how to trim $1 into $10. And it's not some stupid [ __ ] sales pitch. I'm not trying to get you to invest in some [ __ ] mother; I hate those people. So I'm not trying to do that at all. I'm trying to share with you guys exactly what I'm doing, and you can take away from it whatever you want.

We all want to make money, and we all want some really easy steps or just like a how-to guide, step by step, how you can turn $1 into $10. And I'm going to share that with you. It's probably not as exciting or mind-blowing as what you're expecting, but it is the truth, and it will work. This is also a really easy way that you can turn $1 into $10, but it's not quick. If you're expecting some sort of get-rich-quick, I'm going to do this in like a week sort of thing—this isn't it at all.

I'm not going to tell you guys to go like invest in Bitcoin or do some stupid like buy lottery tickets or [ __ ] like that. Like I'm never going to tell you guys to do something stupid. This is something that historically, over time, has done really well, and I'm just sharing what I'm doing personally with you guys, so full disclosure on that.

So let's say you have one dollar, and you're 20 years old. You invest that $1 in an S&P 500 index fund, and that S&P 500 index fund has historically performed at a 7.2 percent return, adjusted for inflation, with your dividends reinvested. Now, if you keep your money in there, and you just reinvest all the money it spits back at you, in 30 years, that $1 is going to be worth $10. By the way, this isn't any sort of like bro science speculation [ __ ]—everything I'm telling you is based on historical returns of the stock market, so that's where I'm getting this data from.

This is how I do it, by the way. I think of every single dollar that I have as being worth ten dollars thirty years from now. So think of that $5 Starbucks that you spent this morning. The way I see it is that that five dollars is really worth fifty dollars of future money to make. I also think about that $80 pair of shoes that you're probably wearing; that's worth 800 dollars thirty years from now. So when you rather have the five dollar coffee now for fifty dollars thirty years from now? Just think of everything in its future value, and that's really what it's going to end up costing you down the line.

So why isn't everybody doing this? Because the concept is extremely simple: it's just invest your money as early as you can, as consistently as you can afford, for as long as you can. I mean, that's the very simple truth about investing and growing your wealth. It's not some crazy sort of speculative [ __ ] that a lot of people are trying to sell you on—no, no, none of that.

And here's why that's really hard. The concept is simple, but actually doing it is really difficult for most people to do. Almost everybody out there just wants to be easy, simple, quick fix. They just want the solution; they just want to know where can they put their money right now to make a ton. They don't want to wait 30 years from now; what's the quick fix? You're like heroin addicts; they just want that quick, easy, immediate fix. And the truth really isn't that exciting to be honest with you.

Also, it takes a lot of discipline not to want to touch your money for 30 years. I mean, think about it. You're putting money away for 30 years from now. That takes a lot of discipline to do that and not actually touch it or spend it. Take me, for example. I was like 20 years old at the time, and I could buy a Lamborghini outright if I really wanted to. That takes a lot of discipline not to go on eBay and be like "buy it now" and just get the immediate gratification because I could have done that.

I dreamed about doing that like every single night of just being like, “[ __ ] it, buy it now, Lamborghini.” It takes a lot of discipline not to do that. Instead, I sold the Lotus I owned at that time, and I invested in real estate. That real estate that I bought back in 2011 has over tripled in value now. I did that. That was the bull market, and I get that we have seen some returns that we haven't seen for a very long time, and that's what really tripled my money.

But at the same time, had I bought stupid [ __ ] like a Lamborghini, I wouldn't have had the cash to take advantage of a down market where I was able to scoop up these properties for really cheap. Had I been really stupid with my money and spent it, I wouldn't have anything left over to invest when I saw opportunity. Now, this isn't really about trying to time the market or trying to hold out for a market crash or trying to buy the very bottom of the market and sell top of the market.

Because I always hear people say, "The stock market's at an all-time high right now; why should I invest now? It is going to be crashing." And the truth is nobody really knows when that's going to happen. Chances are, yes, it's going to be a crash at some point in the future, but nobody knows when the [ __ ] that's going to happen. It could happen next week, or it could happen five years from now, and then you miss out on such an amazing run over the next five years.

I mean, let's be real here. I'm sure people in the 1940s were like, “Guys, I can't invest in the S&P 500 because it just hit fifteen dollars; not too high, man! Let's wait for it to crash to twelve. I'm going to buy at twelve." Well, right now, by the way, the S&P 500 is over $2,300. So if you had bought in 1940 at $15, you were making money whether it went to $17 or whether it was $10—it doesn't [ __ ] matter because they just invested for a long period of time.

Think of it this way, too: if they were holding out for a crash in the 1950s, the S&P 500 was at $100. It was really high at that time. "Oh my God, we should probably wait for it to crash." But wait a second. Over the long term, in 1980, the S&P 500 was over $280 at the time. That was really high for 1980. The S&P 500 had never seen this type of price. I'm sure people were saying back then, “The market's really [ __ ] high, you guys. Let's hold out; let's wait until it crashes to $220. That'll be the best time to buy.”

Well, again, look at the prices now; the S&P 500 is over $2,350 right now at the time of this video. I don't know what it's going to be a year from now. You may be watching this video a year from now in 2018, and maybe it crashed. But just that mentality defeats the entire point of this video that it doesn't really matter what the price is right now. All you care about is what it's going to be 30 years from now, or 40 years from now, or 25 years from now. Chances are it's going to be a lot higher than it is right now.

So that's why I really dislike trying to time the market, trying to wait for a crash, because none of us really know. In the end, it's more important to have your money in the market for as long as possible. Plus, there are so many studies out there that confirm it's less about timing the market and more about timing in the market.

This video is also about putting your money to work for as long as possible and why it's so important to start investing your money as early as you can. Keep this in mind too: if you're 18 years old watching this right now, and you invest $1.00 today, by the time you're 65 years old, that $1 will be worth $26, adjusted for inflation. So that means your $1.00 right now will have the same buying power when you're 65 as $26 has right now today.

Now, if you invested that same $1 at age 40, it's only going to be worth about $5.68. That is a huge difference from one dollar invested at 18 versus one dollar invested at 40. That's $26 that you could have had versus $5.68. You can see the way compound interest works in this graph; at the beginning, it's very slow, but 20 or 30 years down the line, your money grows at such a rapid rate. That's where you want to see your money end up; it just grows exponentially from there.

It's about delaying immediate gratification right now for a very large payout in the future. And I'm not getting paid, by the way, to try to sell you anything. I'm not sponsored by any sort of investment group. I personally use Vanguard, which I really like, but they're not the ones at anchor these videos. I'm not supposed to say any of this; I'm saying it because I'm personally invested in this and I’m passionate about helping other people have the same things that I was able to get.

This is just the simple concept of investing over a long period of time—that's it. And that's why this video might be kind of boring because the truth really isn't as exciting as other people make it seem to be. Now, I know there are people out there who will say you should live life now, man! Live life now! "Final Amber Jeannie" a little bit of lawyers young. I know there are always people out there saying that.

I do believe there is a really fine balance between living your life while you're young and enjoying things that maybe you couldn't necessarily enjoy when you're older. So I totally get that. But I do believe there is a fine line between being irresponsible with your money when you're young and setting aside some money to give your future self a lot of financial security. There's definitely a fine balance between the two, and it's not so much about telling you don't spend any money at all.

I should invest everything; don't live your life at all. "You'll go ball so hard when you're 60, man!" But right now, you shouldn't do anything? Don't do that! I'm not telling you guys to do that. I'm just telling you guys to be responsible and spend money in areas that really give you enjoyment and happiness. Not necessarily do you need that like $300 pair of shoes—is that really going to make you happy?

And if it does, maybe you should just go for it. But I'm just talking about being a little bit smarter with your money so you can go and invest it and make more money in the future. It's just a fine balance between what value something has now versus the potential it has in the future. That's what this is really all about. I'm trying to sell you on the idea of investing consistently over a long period of time, as early as you can, and that's the simple truth.

There's not a lot of people who want to tell you just because it isn't that exciting, and maybe it doesn't get views or whatever, but this—I feel like it's the truth. This is what I do myself, so this is what I want to share with you guys because I do it personally, and I wouldn't be pitching anything that I haven't done myself. And because everyone always wants to like specifically know what to do, I'm going to tell you guys exactly what I do when I invest my money in.

It's boring, but this is what it is: Vanguard S&P 500 index fund, Defiance, or however you say it—BAM! Mom's blown! I have a Roth IRA, and I also have a step 401k account where I also contribute the exact same juice, Defiance. That's what I do in the stock market. The rest of my money I save up in an Ally Bank account earning 1% interest, and when I get enough money, I buy a property with about 20 to 25 percent down.

And then I just rinse and repeat, so that's really all I do. It's not that exciting, but true. Hope you guys enjoy this. Your 60-year-old self will probably right now look back at this video and be thanking you, being like, "Graham, look at all this money I got, man! Look at all this money, BAM!" Yotz! Both girls, man! I really hope that's going to be you when you're like 65 years old.

And again, this is an easy solution; it's not a quick fix. This is something that takes a lot of time and a lot of consistency and a lot of discipline to turn $1 into $10. That's it, you guys. Thank you so much for watching these videos. Thank you for everybody who subscribed—if you're not already, click subscribe so you don't miss out on any of the other videos I'm putting out. Feel free to add me on Snapchat. What else could I say? Like, comment, share, subscribe.

Yeah, you guys, that's it! Thank you guys for watching, and until next time. [Music]