Baby AAI is only crawling and has little cares in the world besides food, playing and his parents. However he’s got a portfolio that’s compounding for him already. Here’s a look at the first stocks I purchased and how I expect that portfolio to perform until his 18th birthday.
I funded Baby AAI’s account with an initial $7500 and have been contributing $100/week since 02/27/17, so 35 weeks. That’s a total of $11,000 in contributions.
You can see the stocks I have purchased so far are Carters (CRI), Hanes (HBI), Disney (DIS) and Pepsi (PEP).
This is a very short time to start looking at gains and losses. The account is currently valued at $11,105.22. That’s just a 1% increase. However, this portfolio has a long time to compound, all shares are currently turned on to DRIP. You can see I’ve already been able to purchase fractional shares by DRIPing into CRI, DIS and HBI.
So how do I expect this portfolio to perform. Well I did the math for you, and I’m hoping to achieve a 7% growth rate which will put the balance right at $200,000 by the time he’s 18. That’s by doing nothing else but contributing $100/mo and letting the power of compounding work its magic. I used a simplified actuarial formula assuming $7500 contributed right away and $5200 ($100/month) contributed at the end of each year.
Here’s a graph of what the value should be at the end of the year, of course the stock market has large swings up and down so this is in a perfect world of 7% compounding each year.
So basically, by the end of the first year, February 27, 2018, the portfolio should be valued at $13,225.00. My total contributions will be just over $100,000. You will notice that it takes a little over 12 years to reach this $100,000 number and less than 6 year later it doubles.
It will be fun to watch this portfolio grow! What do you think?