Compound interest after 100k: why wealth accelerates

0:00Ever noticed how money seems to make more money after 100k? There is a reason your wealth suddenly takes off and has nothing to do with luck or skill. Most people think the rich have some secret access to better investments, that once you hit a certain number, suddenly Wall Street rings you and says, "Please come on in. I've got the golden ticket to wealth." But the real reason your net worth explodes after 100k has nothing to do with special access or even special kittens. It's pure mathematics, and once you understand it, you will never look at money the same way again.

0:30My promise is that by the end of this video, in the next few minutes, I'm going to show you exactly how this works and why you will look at money in a very, very different way than you ever have in the past. So today we're going to break down the most powerful principle in the world. Why 100k is the magic number where your wealth starts to grow at warp speed.

0:49So let's kick off with a myth that most people believe and that keeps most people stuck. Phrases like money makes money, the rich get richer, you need money to make money, right? And you probably think, well yeah, of course the rich get richer, they have access to better investments. Once you hit the 100k, you're going to get invited to this exclusive club where the real money is made.

1:08Because most of these myths are nonsense and noise. Yes, there are some investments that require you to be an accredited investor, which means you need at least a million bucks or something like that. But those exclusive investments, often they don't perform any better than what you can access right now. And that's just another truth that Wall Street doesn't want you to know. You can invest in the S&P 500. Anybody can invest in it with 10 bucks. It has historically performed insanely well.

1:33What is it? Why does your net worth actually explode after 100k? Well, it comes down to 2 simple maths forces that people just misunderstand. One thing is how much money have you got, and the second thing is interest returns, the 10%.

1:48So let me break it down in terms so that a 12-year-old could understand. I'm not trying to talk down at you. It's just that I've read a whole book on this 20 years ago, went in one ear, went out the other ear because it was insanely complicated. And I was thinking if someone had broken this down in a simple way, I would have retired probably 10 years earlier.

2:07So let's explain how this works. The 8th wonder of the world according to Einstein, it is of course compound interest. And before your eyes turn up and you think this is going to be a boring video, I'm going to go and watch some kitten videos, give me a minute because this will literally change how your life is going to be lived from now on. This is what's going to make your children intergenerationally financially free.

2:28What does it mean, compound interest? Well, when you invest money, you earn returns on that money. So let's say you make 10%, that's your interest. So if your shares go up 10%, that's your interest. But the next year after you made 10%, you get 10% on the original investment plus the interest you made last year. So your money starts earning money and then that money earns money and then that money earns money. You get the idea? It's like a snowball rolling down a hill and eventually it becomes this massive unstoppable thing that'll take out a whole village because it becomes an avalanche.

3:01So let me give you the real numbers to make this really, really crystal clear for you. And I printed this out for you because I thought this would be clearer. This is basically a screenshot from a calculator on my website. It's free. Just type in Goat Academy, which is our academy, and compound, and you'll find it. It'll be number one in the Google search results.

3:20And this is a really conservative investment. I didn't want to do 10%. I thought someone's going to say, "Oh, what if it's less?" Well, let's do 8% per year. So what happens? You have no money right now. You put in $1,000 per month. You're broke except for your income. And you do this for 7 years. 7 years. What happens after 7 years of putting $1,000 into the market? You get $100,000. That's here. That is your first $100,000. And it's going to feel freaking amazing.

3:50Now you might think that's a long time, right? 7 years consistent saving to hit that milestone. Oh my god, that's so dull. Yeah, I get you. But let me give you something better. The second $100,000. So to go from the 100k that you now have to 200k, how long is that going to take? Is that going to be 7 years? I can tell you it'll be slightly less than 4 years to get the next one.

4:13So the first 100k, 7 years. Second 100k, just 4 years. Now we could continue this game but you get the idea. So about half the time to get to 300k will take you 3 years. And between each 100k the milestones keep shrinking. The time to get there keeps

5:18Shrinking. Why? Because you're not just earning return on the money you're putting in. You're now earning returns on all the interest that's already accumulated. By the time you hit a million, every year you basically get $100,000 for free just in interest. So it's one year at that point and you get the 100k that took you 7 years to accumulate originally.

5:42So the hardest part is the beginning because in the beginning you don't have this snowball effect. You're rolling a little tiny bit of snow ahead and it just seems to not go anywhere. You're doing all the heavy work yourself. But once you get that snowball rolling, it takes on a life of its own. So that's force number one. If that's clear for you, put a C for compound in the comments and I'll know that it landed for you. And if it didn't, then also tell me and we'll break it down for you one more time.

6:08My name is Felix P. I'm an ex investment banker. I've seen how the big money works and I've also seen regular people struggle for years without understanding why. And that's why I founded the Goat Academy where I've taught over 20,000 students how to invest more like the pros without needing millions to start. I'm also the co-founder of TradeVision.io where we help everyday investors cut through the noise and focus on the news and the data that actually matters, the news and the data that Wall Street looks at. And I want to make it accessible to regular people like you and me.

6:38Because what I learned is that building wealth is not about being the smartest person. I'm not the smartest person by any stretch of the imagination. It's about understanding a few key principles and having some patience. So let them work for you.

6:52What's the second force? The second force is called scale of capital. Something that most people, 99% of people, don't know what this is. And that's why people struggle so much. But it's actually even simpler than the compound interest, but people don't think about it. So the same percentage returns on a larger amount of money give you a larger amount of money. Sounds obvious, right? But let me show you why it matters so much.

7:18Let's say you have 3 different investment amounts. First one is $1,000. The next one is $10,000. And the third one is $100,000. All 3 investments make 10%, to keep the maths really simple, which also happens to be about the average the stock market's returning. So how much are you getting? Well, the $1,000 gives you 10%, gives you $100. Nice dinner. The next one gives you $1,000. 10k, free money. You have $100,000, you now get $10,000 for free delivered by Mr Market.

7:52Same investment, same risk, same time period, same percentage returns, but wildly different results in actual dollars. So here is why this matters. When you're starting out with small amounts, even great returns don't move the needle. 10% on $1,000 is $100. It's not exactly life changing. Might change your dinner plans, but that's about it. But a 10% return on 100k, that $10,000, well that's real money. That's money that can compound into some serious wealth.

8:22And that's why people say once you cross that 100k threshold, same effort, same returns, they start producing dramatically larger results and you're not working any harder. The market isn't treating you any different. You haven't been invited to some special club. You just have more capital and this scales up infinitely. Imagine when you get to the millions. You now get $100,000 for free every year. Didn't do anything. More than most people's salary. It just lands in your account every year.

8:52Now the wealthy understand this and that's why they're obsessed with growing their capital because they know that once you have scale, the same strategies, the same low risk diversified investment thing produces massive, massive results.

9:08So let me show you how we can combine forces. On the one hand, we have our friend compound interest. Spelling is not my strength. That's our first part. We understand that now. And then the second thing we have is our friend scale of capital. Now you add those 2 together and you can create explosive wealth growth.

9:30So let me give you a simple example because this is so important. You just can't run through this often enough. Literally, you invest $1,000 per month. And by the way, if your income is less or a lot more, the same maths applies. You just multiply the numbers up. Same point that I'm making here. You are making 10% per year. It's been the statistical average in the past. Past performance doesn't guarantee future and that sort of thing. And what happens? Well, after 7.2 years, to be pedantic about it, you will have your $100,000 Willy Wonka golden ticket to the wealth club. The important thing to understand

10:32Here is that you did most of the heavy lifting. You added $86,000 to this. The market gave you the difference, the $14,000. So you earned $14,000. Not bad, but it's about 14% of your total, right? You're doing 86% of the work.

10:52So let's keep going. Let's keep going because you are a patient bugger, right? So what happens next? We move forward another 7.2 years. So you are now 14 years into this. And I've just lost most of the audience. So boring, it's so long, right? What happens after 14 years? You have about $366,000 now. You put in how much of that? What do you think? Put in the comments. You put in $168,000. That was you. Mr Market, these two concepts combined added the extra, well, approximately $200,000. Are you starting to see why this is actually exciting?

11:30So we are 14 years in. Now I'm going to show you why your life's going to get better and better and better. Literally the longer you live, the richer you get, because we're going to jump into another 7 years ahead. So we're now 21 years into this. What happens in year 21? In year 21 you have $854,000. How much do you think you contributed to that? Anyone? Give me a guess. Just put 21 and then the amount in the comments down below. I'm going to reveal it. You, my friend, put in $252,000. That was your work. That was your sweat and tears. The market, this wonderful system that I'm teaching you here, what did it do? It gave you $66,000 for free. Easiest money you ever heard.

12:15Can you see what's happening here? Your contribution stayed the same but the returns are exploding here. Most of the money comes from the market. Money you never have to earn in a job. It came from your money making money. And this is the beautiful part. It gets easier and easier and easier. It just grows and grows and grows and grows. You will make more money investing than you will ever earn in your job if you take this concept to heart.

12:40And that's also when you start to realise that retirement is actually not "I need this amount of money and then I need to spend it and then I run out and then I better die on time." No, actually you're going to get wealthier and wealthier and wealthier in retirement just because your money will keep growing for you. It's a snowball. Once it's big enough to start picking up some serious returns, boom.

13:02Now maybe you're thinking, okay, I get the concept, but I've got X amount of money. I'm behind. I want to push harder. I want to push further. I want to make better investments. I keep selling my losers. Actually, I never sell my losers. I keep selling my winners too early, right? I miss out on the big opportunities. And most people feel like that. Most people are frustrated because there's no freaking financial education out there, right? School, college, whatever you did, you get nothing. Nada.

13:28I went to school. I studied economics. Useless. I went to law school. Useless. It wasn't until I actually got a job in banking that these things started to get embedded in my head because my boss told me, right? And then I've been paying mentors ever since to learn more and more and more. And it's what got me to retirement.

13:48You are serious about wealth building. You're serious about potentially accelerating your wealth building. Then my offer to you is give you access to literally my mentors, the guys I trust, the guys I listen to, the guys I respect. And you can do that by booking a free strategy call with us. It's a free call. We'll walk you through. We'll explain exactly what our mentorship looks like, how that might work for you, if it's the right thing for you. Zero pressure. It's just a free call basically, and you get to chat with us and find out more. That works. You get to ask us a gazillion questions. And at the end of that you're going to have a lot more clarity.

14:20So that's something you might want to do. I don't usually put this out on YouTube. Felix.org/freedom, because my hope is it'll guide you toward the path of freedom. And by the way, my mentors are guys who've worked on Wall Street for 10, 20, 30, 40, 50 years. Guys who've managed billions of dollars, guys who run hedge funds, guys who really know how the markets work and are also insanely kind and patient. So you can be a complete beginner. We actually love beginners. So links in the description down below.

14:52But you're still thinking, well, I haven't got the $100,000. How do we get there faster, right? You haven't got 7 years. And look, I'm going to be brutally honest with you. There isn't a shortcut to time, but there is a shortcut to what I see most people doing. So the market, say the market does 10%, right? It's a kind of a promise. That's the market. Most retail investors underperform the market. Most retail investors do 4% a year. That's you. Why? Because they FOMO buy. They have a beautiful winner, but they're

15:38Scared. So they sell it early. They have a stock that becomes a dud because management is idiotic and it goes down 30%, 40%, 50%, 70%. They're holding on to it. Bag holders, I call them. That's avoidable. And the difference between 4% and 10% is decades.

15:58So if you only get a 4% return, which is what the average is, and you did our same little game here, do you remember where we got to after 21 years? We got to $854,000. If you only do 4%, do you know what happens after 20 years? You get less than half of that. You get about $370,000. So this here after 20 years will get you about $360,000. Not enough to retire on, but that up there will get you $850,000. There's a difference of $500,000.

16:25And how do you bridge the difference? It's just a skill. Investing is a skill. It's like driving a car. It's like swimming. It's like hitting a ball well or whatever. It's a skill. And people put hours and hours and hours in learning that skill.

16:38I spent the last year learning how do I do a handstand, a free handstand in the middle of the room. It's taken me about 100 personal training sessions. I know I'm weird. About half of which is, that's about 50 hours. Yet people don't spend 50 hours on learning how the market works. You've just spent 50 minutes on it, which is brilliant.

17:00But this is like level 1. There is level 2 and there's level 3. If you want to get really serious about this and you want to make sure you get to 10%, let alone even outperform the market, that would be a whole other thing. You better start taking this more seriously because you can't go back and start investing at 18 again. But you can start today and years down the road from now you're going to be incredibly grateful you did.

17:22Your investments are like a snowball rolling down the hill. At first, it's small and slow. The longer it rolls, the bigger it gets. Some people suck at making snowballs. Some people are very good at it. That's the thing you can control because the bigger it gets, the faster it grows.

17:38And some of you are thinking, yeah, but the market's about to crash. I'm going to wait. What if we're in a recession? Well, look, the market's going to crash temporarily all the time. But what history shows us is that the market always recovers and it always goes on to make new highs.

17:55If you put $10,000 into the S&P in 2008, before the crash, you put in $10,000 into the market and you just held on to 2020, you didn't add a single dollar. That $10,000 became $30,000. So you bought at the top of the market here and you made 3 times your money. So you made investment decisions at literally the worst possible time, but you didn't panic, you didn't sell, and therefore you made money.

18:22So if you panic and you sell during a crash, you miss the recovery. The investors who win are the ones who stay invested or are smart enough to have some smart risk management and that kind of thing. But most people don't fall into that category because most people spend bugger all time on educating themselves.

18:40Now you're different. You made it this far in this video. So I get it. You're more serious about this. So start investing today. Never stop. Think about learning the skills that'll make you a better investor, better at risk management. Make sure you never have those big losses again because they are really avoidable. That's one thing I can actually promise. Big losses are avoidable.

19:02But the next time you're going to obsess about researching some company and worrying whether you should buy Tesla or Amazon, whatever, that is actually not where you're making your money. I'm somebody who researches companies and I pick them carefully. But what matters a lot more is putting the money in the market. How much are you investing? Can you squeeze an extra $100 in there a month? That makes a big freaking difference.

19:22But I want you to understand that small amounts of money are very valuable. If you put $100 per month into the market and it got you 10%, you have no other money, just $100 a month, and you do that for 20 years, how much do you think that's worth? This is just 10% returns, not the 12 getting the last 10 years. That's $75,000.

19:45So the way I look at money is the $100 I'm spending on something random right now, is it worth $75,000 to me? And that's only 20 years. I plan to live on a lot more than 20 years. So I know that actually a small amount of money can make a very, very, very big impact on my wealth and the impact I'm leaving and the intergenerational wealth that I'm creating.

20:08So if you respect the money, it doesn't mean you should live in a basement with the lights off, but you just want to think, I'm spending money on this. Does this really create joy in me? Is this really something, this is amazing. And if it isn't, why don't I just take that money.

20:29And put it in the market because I know that's going to create some serious joy down the road. That's going to create some serious freedom down the road. And actually, I want the freedom more than the 3 cocktails right now or whatever it is. That's just the way I look at money. And it took me a while to learn that.

20:45You start looking at money like that, it makes you more respectful of money and more respectful of yourself because you brought that money in. You want to respect your time and the value, the wealth that you're creating and you don't want to just chuck it away at some random stuff.

21:00That's the note I want to leave you with. You got some value out of this. Share it with somebody who might also get some value out of this, who might then look at money in a different way. I hope you enjoyed this. Share it with people and I wish you great success.