Try to keep up!
The snowball effect in investing is basically the idea that you start off investing some money (snow) but as you add more money the invested money starts to generate returns (the snowball is picking up snow off the ground as well as having snow added by you).
At first the amount you add is much more important than the amount the snowball picks up by itself, but eventually that relationship switches as the snowball gets larger and starts rolling downhill on its own (you are pushing it downhill, right, by investing in things that appreciate or generate income?).
My wife’s J401k account is starting to show this. After three years the monthly contribution (63,000 yen as a self-employed worker) is under 3% of the balance. The price movements of the funds in the account are becoming more significant than what we put in.
I can only imagine how that will look in another ten years time.
My Rakuten Securities account will someday produce enough dividends to fully fund my NISA account each year. That’s not going to happen for a while, but it’s one of my goals.
How about you? Any snowballs in your life?
Your wife’s J401 account earns 3% interest, compounded monthly? Somehow I missed that information on your blog, gonna have to dig back to find it! That’s very decent!
Heh, heh, sadly not 😀
The price movements (up and down) are starting to be more than the monthly contributions…
Actually the yen balance is down due to the strong yen, but I am expecting that to swing back at some point.
Although Minako Takegawa writes in her book that the tax advantage for a J401k account is equivalent to 15% as soon as you put the money in.