"My wealth has come from a combination of living in America, some lucky genes, and compound interest." Warren Buffett
The Law of Compound Interest
In 1626 the island of Manhattan was sold by a group of Native people to Dutch traders for 60 guilders or about $24.
To Native people this is a cautionary tale. A reminder to guard our precious assets from those who would seek to take advantage of us. Perhaps though we in this era can learn a more positive lesson.
If that $24 had been invested over the last 390 years at a rate of return of 7%.
It today would be a sum of over: $6,916,470,659,400 ($6.9 Trillion).
What you’re seeing here is money compounding over time in what is called The Law of Compound Interest. What Albert Einstein called the “the most powerful force in the Universe”.
Did you know that by using this Law and the overall returns of the market:
$100,000 invested with a $100,000 added yearly turns into $1 billion in 71 years.
$1,000,000 invested with a $1,000,000 added yearly turns into $1 billion in 47 years.
And $10,000,000 invested with $10,000,000 added yearly turns into $1 billion in 24 years.
It is the commitment of our firm to assist Tribes in the creation of their own $1 billion endowment-style capital base.
We believe that once Tribes have the knowledge, discipline and thrift to create $1 billion - they can create $10 billion and beyond and create true self-sufficiency.
To do this we start by helping our clients implement and model the best practices for long-term wealth creation. As such, we look to help our clients grow their capital base through investments that have the ability to compound at the highest rates of return over the longest periods of time.
As Dr. Jeremy Siegel of the Wharton School of Business has shown in his research, equities/stocks with their ability to retain and reinvest their earnings for future growth, have historically proven to be far and away the best long-term asset class to invest in. (*Note: we are not advocating owning individual stocks due to the risk of possible loss of capital but owning the market in aggregate through low cost passively managed index funds earning long-term trend line returns.)
The above graph created by Dr. Siegel shows the grow of $1 invested in 1802 through 2006 in all the major asset classes.
The totals are as follows:
Consumer Price Index (CPI): $16.84 a measure of inflation
$1000 invested in 1802 in the overall stock market today would be $12.7 billion versus $18 million had it been invested in bonds. The difference is that stocks represent ownership in businesses and have the ability to compound their overall return through the retention and reinvestment of earnings for future growth. Unlike bonds that only pay simple interest.
As John Bogle has shown in his research the overall U.S. stock market (currently consisting of approximately 3700 companies) and selected parts of it, such as the S&P 500 (the top 500 U.S. companies determined by market capitalization), have historically returned a rate of approximately 10% acting as long-term compounding machines.
The S&P 500 and the total stock market composite are the benchmarks that all long-term investments and active investment managers are measured by.
We are a generational people by capturing the long-term trend line returns of the market and allowing assets to compound over time Tribes place themselves on the path towards success.
We believe that by following the structural model of institutions such as the Yale Corporation and its Endowment (see ABOUT page) and the investment model outlined above all Tribal Groups have the ability to achieve financial independence within 2 generations.
For us success starts through a 4 step process:
1. We work with you to create and implement a multi-decade plan of action.
2. We educate leadership through workshops on the creation of long-term wealth giving them a generational investment perspective as well as a benchmark to measure all potential business and investment opportunities brought to them.
3. We give leadership insight and a steady barometer on the overall behavioral psychology of the markets and world economies which can have a huge short-term impact on portfolios when the human emotions of fear and greed are running rampant. Many see the markets as a huge casino: we do not! Instead we focus on the underlying productive nature of the assets as World Gross Domestic Product increases not the minute by minute price quotes of those assets that tends to be the focal point of most investors.
4. We help find matching funds for our clients.
Following these steps we absolutely believe all of our clients will achieve success. To us it is not a matter of “if” it is a matter of “when”. Tribes are a generational people if we compound our assets over long periods of time as the world economy marches forward we will leave future generations with a strong government, secure land base and the highest standard of living.