The new “Trump Accounts” are coming soon to a kid near you
3 thoughts on why I’m a fan of these accounts
I pulled up some news this morning and saw this cool headline:
Michael and Susan Dell donate $6.25 billion to encourage families to claim ‘Trump Accounts’
“Wait a minute ... what are ‘Trump Accounts?’” I asked myself.
“I don’t know, let’s read and find out,” I answered.
(Yes, I sometimes talk to myself. 😆)
It turns out that these Trump Accounts are a new way for helping the next generation get a leg up on their future university education, or home buying, or even retirement. Basically, the government is looking to add one or two thousand dollars into funds for children born within certain dates so they can invest in index funds.
I say:
Brilliant!
We need more people investing in their future.
Something the article points out is that only 58% of U.S. households invest in the stock market.
That actually seems kind of high to me, but maybe there are enough retirement accounts out there that makes this true.
(I’d expect it to be closer to the 20-30% range. You know, the Pareto Principle.)
Anyway, here’s what I like about this:
1. It’s a simple way to help people while using the power of compounding.
Albert Einstein called compounding interest the eighth wonder of the world. It’s phenomenal how much growth can happen from a small amount of money when compounded over time.
For example, if that $1,000 grows at 10% inside an S&P 500 fund (which is the average annual return) for 65 years (from birth to retirement age), then that person could retire with around $490,370.73.
And that’s just brain-dead easy “set it and forget it” growth.
Just imagine what could happen if someone actually works to buy income-producing assets throughout their career?!
2. It’s an injection of capital into the market.
Admittedly, this is selfish on my part.
I want people investing into the market so I can surf the wave and grow my own accounts with it. I am, after all, running a trading business.
(Yes, I make most of my money trading the markets and a little bit teaching how I trade the markets. Not every trading guru makes most of their money doing what they teach. I do.)
On a macro economic level, I’m a fan of the trickle-down approach. So I like to see a little stimulus injected into the markets to “grease the wheels” of the market vehicle. But most of the time the gum’mit is dumb about how they do this.
i.e., cutting stimulus checks directly to people.
This approach — giving a little boost into a fund account — is at least forward thinking. Although I have no illusions about its protection from corruption. If there is money moving, people will find ways to defraud the system.
Still, I think it’s a step forward.
3. It helps solve an impending issue of Social Security funds drying up.
This is the big boogeyman.
In my view, Social Security is just a giant Ponzi scheme and we’re getting to the point where the people contributing to the scheme are going to be unable to keep it afloat.
While this isn’t a perfect solution (relying on gum’mit help is never a perfect solution), it’s something. So, I’ll take it.
At the end of the day, I’m responsible for myself.
It’s my job to buy income-producing assets so I can escape the rat race and build a wealthy life for myself and my family.
While I like this plan, it’s still way too slow for me.
I’ve heard index-funded growth called the “slow lane.” (I think M.J. DeMarco calls it that.)
I agree with that take.
Yet I wanted to take a “fast lane” approach to my own accounts. Which is why I jumped into trading in the first place. And it’s why I use the approach I have now (developed across five years of options trading experience) to double my account each year.
(That’s some significant compounded growth.)
If you’re curious about my approach, leave a comment.
Otherwise, let me know your thoughts on the new Trump Accounts.
— Ricky Ketchum