A matter of time

Personal finance | Different timelines require different strategies for investment | David Bahnsen

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My last article laid out the importance of "compounding" in the process of accumulating money toward financial goals. (Because of compounding our money grows, then that amount grows, then that amount grows, and so forth, thereby enabling our money to grow faster through time than we would normally envision.) Time is a gift to those seeking to accumulate wealth, and the law of investment return is this: With less time, a higher return is needed; with more time, a lower return is needed.

Let's turn to fundamental issues of risk and reward: How do we accumulate funds toward our various financial goals? The first step in the process is a careful and calculated determination of financial goals. For some, the short-term goal of a down payment for a house is most pressing. For many, saving for the day without income (commonly but mistakenly called "retirement") is the prominent financial concern. With rising tuition expenses, many families desire to help their children or grandchildren with future college costs, but do not know how they can.