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Why It’s Great To Be An Investor

November 3rd, 2011 Leave a comment Go to comments

When I first started investing, I realized there were a few pretty cool things that came with it. When you realize what it’s all about, you wonder why everyone doesn’t invest because the benefits are so obvious. Here are some of the cool things:

  • Investing allows you to profit off the productivity of people who are smarter and more productive. As one person you can only be so productive with you own effort, but with investing you can benefit from the productivity of thousands of other people.
  • You can make money (cash in your pocket) from the profits of the investments you own. Unlike a wage earning job, no commuting is required, no drying cleaning required, you make money without any effort.
  • As if getting cash in your pocket wasn’t enough, if you pick great investments you will get a ‘raise’ every year. No negotiation required.
  • If you select great companies, their future growth will enable you to live a higher standard of living in the future. The key to this is productivity and business growth which you take part in by owning the investment.
  • Investments are location independent, unlike a typical job. If you earn enough money off of them you can go, live, travel anywhere.

Since it’s near the end of the year and this is the time of year to rebalance/take gains/take losses due to ta reporting, I want to demonstrate another benefit of investing. Paying taxes! OK, I’m kind of half joking here but all things considered when paying taxes it’s better to be an investor than not. I’ve written about this previously here. I will demonstrate that investors pay lower taxes. Below is a comparison of an investor who earns $1,000 a year earning dividends (say a company like ExxonMobil) versus a wage earner who makes another $1,000/per year at the job.

Amount Payroll Tax Federal Tax State Tax What You Keep
Wage Earner $1,000 $75 $250 $40 $635
Investor $1,000 $0 $150 $40 $810

So, after all of the above benefits, you also get to keep more of it. Not bad.

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