The Time Horizon of Wealth Is Super Long
Nicole Dieker

From a behavioral standpoint, the absolute worst thing about investing is that, in the beginning, a sensibly invested portfolio will have very little to show for. Compound returns follow a “J curve”, which means that the vast majority of your investment gains will be made in the back half of your investment horizon. So as you’re starting to build your nest egg, the biggest increases you generally see in your portfolio come from your contributions, not your investment returns.

That is the biggest reason why so many people don’t consistently save and invest their money. It’ll take over a decade before you start to see your portfolio generating returns that make you think “wow, if I keep this up, I could eventually live off of this”. Combine that with investment risk, and so many people either get discouraged and stop saving or don’t even bother starting.

Compulsory retirement investing has been brought up in policy circles, and I think it’s a good idea. Means tested contributions with a compulsory investment vehicle would be a good way to partially privatize Social Security (which is essentially a compulsory investment vehicle, except your contributions pay for the previous generation and determine how much the next generation has to pony up for your own retirement) and create more retirement security for average Americans who don’t have the knowledge and discipline to consistently save and invest for retirement.

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