What caught my eye this week.
Time is one of the most valuable resources when you’re aiming for financial freedom through compounding.
The power of compound interest is largely back-loaded: early savings matter, but the real payoff comes from returns on money you’ve already accumulated.
For example, a 10% return on a near-retirement nest egg of £1,000,000 yields £100,000, which dwarfs a 10% return on a first-year saving of £5,000—only £500.
The longer your money has to compound, the greater the benefit. Unfortunately we can’t go back and start earlier, which is a common regret when compound interest finally “clicks”.
One practical idea to gain more compounding time comes from Nick Maggiulli at On Dollars and Data. In a thoughtful piece he suggests one of the most accessible ways to extend the period you can enjoy compounding is to extend your healthy years of life.
How exactly?
According to the data, the answer is…exercise.
Exercising regularly to improve your strength and your cardiovascular health is the most effective way to increase how much time left you have on this Earth, all else equal.
I agree that personal fitness is an underappreciated element of long-term financial planning. Few people would want to retire into a shorter, less active life if they could avoid it. Staying fit not only improves quality of life but also increases the years in which you can actually enjoy your savings and investments.
Maggiulli’s analysis suggests that adopting a consistent exercise habit can add three to five years to your lifespan in general terms, and being truly fit can translate into six to eight additional healthy years later in life compared with doing nothing.
You don’t need stress yourself out trying to save every penny. Instead, you exercise more, reduce your stress, and extend your life. This is a non-financial solution to a financial problem.
And while it might seem unorthodox, for those that are having trouble saving more, it might be the best option available.
It’s a useful reminder: improving your health is an investment in more than just your body. It’s an investment in time—time that allows your savings to compound and your retirement years to be lived fully.
Read the full post on On Dollars and Data, then get moving—and have a great weekend.
From Monevator
Passive vs active investing: why passive wins – Monevator
Fixing your financial posture – Monevator
From the archive-ator: how to protect your portfolio in a crisis – Monevator
News
Note: Some links are Google search results. On a PC/desktop you may be able to open pieces without a subscription by using privacy/incognito mode. If you read these sites regularly, consider subscribing.1
Bank of England postpones next interest rate decision for a week – ThisIsMoney
Government to cap average energy bills at £2,500 from October – Sky News
Halifax and Barratt warn of a tougher period ahead for the housing market – Guardian
How a thief is stealing thousands from London gym members – BBC
Pioneering study ranks the best and worst jobs in the UK – Guardian
Europe’s new wartime energy dilemma: the rise of unavoidable fossil fuel use [Search result] – FT
Lloyd’s of London gives staff a £2,500 cost-of-living payment – ThisIsMoney
Property instructor accused of silencing critics over expensive courses – Guardian
The bad news for the pound is not fully reflected in its price [Search result] – FT
Products and services
How the new energy price guarantee will affect gas and electricity customers – Guardian
Chip launches a lottery-style savings product with a £10,000 top prize – ThisIsMoney
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
When will King Charles’ portrait appear on UK coins and banknotes? – ThisIsMoney
NatWest 3.8% Digital Regular Saver account review – Be Clever With Your Cash
Tips for saving energy by warming your clothes – Guardian
Sainsbury’s Bank reduces credit card Nectar points – Which
Homes with Bake Off-worthy kitchens, in pictures – Guardian
Comment and opinion
The only equation that matters – Fortunes & Frictions
How passive are markets, actually? [Spoiler: more than you think] – FT
Retiring from unemployment – Dror Poleg
The Great British housing wealth divide [Search result] – FT
What’s alpha? – Morningstar
Tips for working from home successfully – Humble Dollar
Financial crises and the risk of suicide – Advisor Perspectives
Reality is messier than spreadsheets – A Wealth of Common Sense
When your side hustle becomes a drag – Vox
Behind the scenes of making a Netflix documentary – Mr Money Mustache
Best option – Humble Dollar
Value shares mini-special
The link between stock multiples and interest rates is often overstated – Albert Bridge
Have you looked at correlations with inflation? – Klement on Investing
Naughty corner: Active antics
Why is active fund selection so difficult? – Behavioural Investment
US equities look comparatively undervalued after the latest pullback – Morningstar
The learning mindset for active investors – Neckar’s Minds and Markets
Blackstone-backed song-rights vehicle faces growing pains [Search result] – FT
The UK’s top 40 dividend stocks – UK Dividend Stocks
Jeremy Grantham: entering the super-bubble’s final act – GMO
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
How To Own The World by Andrew Craig – £0.99 on Kindle
Quit Like A Millionaire: No Gimmicks, Luck, or Trust Fund Required by Kristy Shen – £0.99 on Kindle
Way Of The Wolf by Jordan Belfort – £0.99 on Kindle
Environmental factors
Investing in (unlisted) Thrive Renewables – DIY Investor
Shades of green in ESG investing – Humble Dollar
Killing invasive species has become a competitive activity – New Yorker
He protected our oceans and then vanished – BBC
Why birds changed their song during the pandemic – Atlas Obscura
How Facebook is helping snake conservation – Scientific American
Off our beat
The super-rich ‘preppers’ preparing for apocalyptic scenarios – Guardian
Chesterton’s Fence: a guide to second-order thinking – Farnam Street
Some encouraging news in the fight against long Covid – Guardian
Create a simple newsletter to support your business – Spilled Coffee
The lesson from Lord of the Rings ‘review bombing’ – UnHerd
New studies reinforce the link between ultra-processed foods and cancer risk – Delish
Michael Sheen rallies the Welsh [Video] – via Twitter
Stewart Lee on how history will remember Boris Johnson – Guardian
And finally…
“That was leadership, it was doing the right thing, it was duty, it set an example.”
– Archbishop of Canterbury’s praise for The Queen at her husband’s funeral
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