$10k Challenge: Maximize Your Investments

I'm on a quest to raise an additional $10k this year in income -- extra income outside my regular job. The numbers I ran show that making this amount and socking it away year after year can yield quite a sizeable next egg.

I've already suggested ways I'm working on this $10k including turning a hobby into an income, making money with credit cards and selling stuff you own. Today's suggested idea for those of you playing along: maximize your investments.

It's shocking how much a simple 1% more can return you over the life of an investment portfolio. Consider these results for the same $10,000 investment over 40 years -- the only difference is the rate of return:

• At 7% annual return, you'll have $139,948 in 40 years.
• At 8% annual return, you'll have $201,153 in 40 years.
• At 9% annual return, you'll have $288,160 in 40 years.
• At 10% annual return, you'll have $411,448 in 40 years.
• At 11% annual return, you'll have $585,593 in 40 years.

See how just 1% can make a world of difference over time? If you improve the results of a single $10,000 investment by and earn an extra $150,000 over 40 years (that's $3,750 a year), just think what will happen if you earn an extra 1% on a much higher level of investment for 40 years. You'll easily have your $10k per year made in this one area alone.

So, that begs the question, what can you do to maximize your investment returns? Here are some suggestions:

• Invest regularly.

• Set investment.

• Don't take unnecessary risks.

• Keep time on your side.

• Diversify.

• Minimize investment costs including taxes.

• Allocate your investments properly and rebalance your portfolio regularly.

• Don't listen to the financial media.

For me, all this adds up to investing in index funds.

Comments

[Lazy Man and Money]

Don't you already invest in index funds? What steps are you taking this year to earn that extra 1% to get you closer to your goal?

[EA]

I just moved my rollover IRA from the default option (the same company the 401(k) was with) to Vanguard. I'm going to save close to 1% in fees, which is like earning another 1% on the investments. Check your investment fees, you might find a place to "cut the fat" and save some cash.

[Finance]

The longer the time will make your aggregate returns higher, and this can make a big difference even with a slight 1% higher.