Introduction

I will write this blog as one way (of several) to carry forward my learnings, knowledge and ideas from within especially the investment area to my kids. Hopefully I will learn additional new insights into investing by also sharing with the rest of the blog community.

It will probably still be a couple of years before you (i.e. my kids) will be interested enough to start to look into this area of life, but my wish is that it will be (much) earlier than for me. The reason for this is the enormous power of compound interest. I basically started something really called investing (in stocks) around 2002/2003 and then on a fairly small scale. Before that I was only speculating for a few years (even though I thought I was investing), and before that I did not think I could earn any money by investing. I most likely lost some 10-12 years of investing experience by simply not having been aware of the possibility. With some guidance early on in my life, I would most likely have been even (very) much better off today than I currently am.

Anyway, a key take-away:
Make sure you make compound interest work for you for as long time as is ever possible. So every day, month and year earlier that you start, the better. Simply put, reinvest the interest and next year you will earn more (given the same interest). Initially the effect is fairly small in nominal terms, but (depending on the interest rate) the nominal effect after several years can be very large.

One practical example from your own life: I have on your behalf invested an amount similar to your full 'barnbidrag' in stocks since you were born. Assuming
- a 9% compound interest (before taxes)
- that we continue to invest the full 'barnbidrag' until you are 18 years and
- that you do not touch the money until you are 50
then it will be worth more than 8 MSEK in nominal terms (and before taxes). Meanwhile, we have only set aside 226 800 SEK until you're 18. When I write this post, your combined CAGR (term I will use for compound interest) is about 17,7% (before taxes and during a timespan of give or take a decade). This I will NOT be able to continue to replicate due to several factors. However, I believe it could be possible to reach 12-15% with a lot of hard work spent on investing over a timespan of another about 40 years. That could mean in rough terms between 25 to 80 MSEK when you're 50 years old (and that's quite much money, even 40 years from now).

So think hard about the power of compound interest and start investing as early as possible.