Rule Du Jour: Rule #40 Do Not Tread Water (Patreon)

Rule Du Jour: Rule #40 Do Not Tread Water ie key to Outpace the Money Printer

Life Lesson: If your investments merely match the growth rate of the money supply, you're essentially treading water, not building wealth. To truly get ahead, your returns must exceed inflation and the expansion of the money supply.

Why?

• Tad Smith, a former finance professor, highlights that if the money supply grows by 8-10% annually while the S&P 500 returns about 9%, you're not really gaining wealth. You're just keeping up with inflation and monetary expansion.

• Historical Data: The S&P 500's average annual return over the last 30 years (up to 2024) was around 9.90% before inflation. This figure, when not significantly outpacing inflation or money supply growth, does not lead to any wealth accumulation. You think you are killing it at 9% but in reality you are drowning.

• Goal Setting: As I have always emphasized for years, if your investment returns are not at least 14%, and we are escalating towards 15% or higher, you're effectively "drowning" in terms of real wealth growth. This is because your gains are eroded by inflation and the increasing money supply.

It's nice to see Tad using my old analogy. The more of us that see this, the more of us will survive the onslaught.

Stuck in the USD system, or any FIAT system, you can't win:

h/t to Mike for the inspiration