Who are you going to vote for in 2012?

[Reaganomics!]

 

Phil, if you made $20 Million a year on interest, dividends and capital gains, wouldn't you call that easy money? Not having to lift a finger. That's Romney's income. The rich don't have to worry about the cost of living so much.

 

 

Phil's point was that where interest rates are right now, you can't really accumulate money by just having it sit in a bank. Low interest rates are a strategy to try to stimulate spending because, theoretically, if you're money isn't going to increase by being in a bank you might as well invest it...or stick it in the cayman islands.

 

Dividends and capital gains are something else entirely.

[LSDis4me]

^

Dividends and capital gains are bigger earners. But even having your money sit in a bank can bring in wealth. When I was a kid, the lowest interest rate people earned was 5.25% for having no minimum balance. If you put your money away for 6 months without touching it, it would earn 12.5%. How things have changed. But let's say someone can earn 1% interest on money in the bank. If you put in 10K you'll earn 100 dollars in a year. Not much. But if you are super rich, like Romney, and you put $100 Million into that same account, you'd earn a million dollars in that year. Easy money.

[hotmess]

[Phil O'Keefe]

^ Dividends and capital gains are bigger earners.

 

Usually. But remember - you only pay capital gains tax when you sell an asset, and even then, only if it's worth more than you paid for it.

 

But even having your money sit in a bank can bring in wealth. When I was a kid, the lowest interest rate people earned was 5.25% for having no minimum balance. If you put your money away for 6 months without touching it, it would earn 12.5%. How things have changed.

 

Yes, you can make money off of interest, but it depends on many other factors, including the current interest rate, the cost of living, inflation, etc. If you're making 5.25% on interest, but inflation is at 10%, and your home mortgage is at 9 or 10%, you're losing money, not gaining it. I suspect that back "when you were a kid" (can we define the decade at least?), that was probably the case. It certainly was for much of the 70s and 80s.

 

My point, as Reganomics correctly pointed out, is that interest income is currently not an effective way to grow your money. Dividends and capital gains are a completely different matter.

 

But let's say someone can earn 1% interest on money in the bank. If you put in 10K you'll earn 100 dollars in a year. Not much. But if you are super rich, like Romney, and you put $100 Million into that same account, you'd earn a million dollars in that year. Easy money.

 

He's still losing money under that scenario, since that 1% doesn't cover inflation. If inflation exceeds the interest rate, your money, in terms of real purchasing power, is decreasing, not growing.

 

Another quick observation: If it's so "easy", then why aren't we all working the interest, dividends and capital gains fields and making money? In fact, I suspect that most people who try "day trading" end up losing money at it, not making it. IOW, I'm not convinced that it's as easy as you suggest it is.

[driverhasabomb]

Another quick observation: If it's so "easy", then why aren't we all working the interest, dividends and capital gains fields and making money? In fact, I suspect that most people who try "day trading" end up losing money at it, not making it. IOW, I'm not convinced that it's as easy as you suggest it is.

 

Because the average person doesn't have the assets necessary to make it lucrative. Making a few hundred dollars on the 1,000 shares you can afford is a lot different than what the very wealthy do. It's also unlikely you can afford a team of accountants to make sure you're keeping every penny you possibly can.

[Ryan.]

First dollar, last dollar.

[Phil O'Keefe]

 

Because the average person doesn't have the assets necessary to make it lucrative. Making a few hundred dollars on the 1,000 shares you can afford is a lot different than what the very wealthy do. It's also unlikely you can afford a team of accountants to make sure you're keeping every penny you possibly can.

 

 

What the wealthy also do is they reinvest the profits. If you start with only a few hundred dollars, and keep adding a few hundred to the investment fund as often as you can afford it, and you keep reinvesting the profits, it compounds. It grows. That's how a lot of the wealthy got that way.

 

Sure, Romney inherited a sizable chunk, which helped him initially... but like many who inherit money, he could have blown / lost it too. Just because you start with a large amount of money doesn't mean you've got it made, and it will be "easy" to increase your wealth. How many famous musicians made a mint, then lost it all over the years due to bad investments? More than a few... again, investing and finance requires a different skill set - I don't think it's as "easy" as some people think it is, even with a large initial chunk of change to work with.

[LSDis4me]

Phil, the point is that Romney makes $20 Million a year by doing no real work. That's easy money.