Welcome to part 2 of my 3 part series examining the ROI of the various major investment decisions that I made over the past decade while building my nest egg. For those of you just joining us, we’ve backtesting 5 decisions I made on an investor who starts saving 10% of their $10k per year salary in 1975 and who retires in 2018. Using the real historical stock returns, our saver ends up with nearly $1.3M to retire on. I break down the contribution of each decision to that $1.3M as follows:
- Start investing at all: 50%
- Invest 10% of my income (vs. 5%): 31%
- Start investing at 23 (rather than 30): 5%
- Stick with my plan and stay in the market: 14%
- Diversification across asset classes: 0%, but reduces risk
Those results are critically important, especially starting early and saving a significant percentage of one’s salary, but they’re pretty basic. Today we’re going to take a look at three more exotic ways to build a retirement portfolio and see how (and if) they contribute to returns in light of how much time they take to achieve.