How Can Investors Receive Compounding Returns?

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Hey guys,

It took me longer than normal to get set up today.

I’m beginning to question this second screen and the overall setup I’ve got.

Not sure if it’s taking me more time to get set up than is worth it.

However – when thinking of this and the reasons why I have this setup:

It inspired me to write this post to talk about the power of compounding and the different types of returns you can generate from it.

So for those of you who are investors that have maybe found this because you’re looking for financial information, I’ll briefly touch upon that – but then get to (in my opinion) – the much more interesting stuff.

Table of Contents

What are compounding returns?

So typically a compounding returns are when you make a financial investment into an asset that delivers some kind of steady rate of return – this return continues to grow because the investment is continually made into the underlying asset.

E.g if you stick £1 into an annual savings account that has an interest rate of 10% – this means at the end of Year 1 – it will return £1.10p (i.e a 10p return)

That means in year 2, you will receive a 10% return on £1.10 – which would turn this total fund into £1.21p (i.e an 11 pence return).

NOW in year 3, you will receive a 10% return on £1.21 which is 12.1p thus making it £1.33.1p

I think you can see where I’m going with this – and it’s pretty exciting when you think about it – as your ultimate capital can grow without you doing anything at all.

Of course, if you continually reinvest then that’s where the numbers can accelerate quickly and over the years someone can retire themselves (imagine that starting number was £1,000 or £5,000 – what can you achieve or the decades)

What Kinds Of Things Can I Invest In?

If we’re looking at it from a financial perspective, then you can look into things such as Mutual Funds – i.e stocks that have dividends (profit) payouts. What happens then – is that those same profits are used to buy more stock – so when the next payout lands you’ll receive more shares in an “endless” cycle of growth – but yes they’re pretty good!

You’ve got other types of financial instruments such as ISAs (instant access savings accounts), Exchange Traded Funds (EFTs), Certificates of Deposits, Zero Coupon bonds which you’d definitely be better off speaking to an investment professional about.

These are all things that I have little/no personal experience with.

So how quickly can I become a millionaire in this scenario?

Probably worth us looking at stock movements over the years as an investment since that seems to be what all the smart investors do (I’m clearly a dumbass in this regard but hey-ho LOL) –

So Vanguard (one of the most sensible companies to put together a portfolio with) reckon that between 1926 – 2019 a 100% investment into a stock portfolio would grow on average 10.1% a year.

Using that we can run some basic math.

If you invested £50 a month – you’d be a million in about 54 years.
If you invested £100 a month – make that 47 years.
If you’re talking £1,000 a month – then we’re looking at 24 years (that’s not bad).

That’s a range of scenarios from boring to somewhat attractive.

But yes, there you have it.

For you finance folks – this is an excellent way to think about how to grow your wealth now and (mostly) in the future.

I’m sure my brother-in-law Robert (a partner at St James’ Place) is going to ring me immediately after reading this to discuss my investment strategy.

Other Types Of Compound Interest

This is where the fun starts!

Hold on to your seats lol.

So much like the effects of positive compounding – it can also happen inversely.

And that’s the part that is deadly and can creep up over the years.

So, I’ve invested in a stand for my Macbook because I recently started to get back pain. The sole reason for this (and it got painful to the extent that I would feel my back pulsating when I’d go out for my evening walks) is because I sat slouched over my laptop when I’m working.

Obviously, this is no good for my back at all.

But do you see if you apply the inverse type of growth to something negative – how that can quickly become deadly as well.

I’m not going to blind you with math now – but rather common sense.

What is the effect of slouching for a back that’s already in pain Versus a healthy back?

If you do this over a number of years…what do you think will happen to your back?

Yup – debilitating pain.

With all of this in mind – I guess I ‘mind’ less that my setup takes me around 3-5 minutes longer each morning because it’ll ‘save’ my back and my quality of life as I get older.

I’d encourage you to think about your health in the same way.

If you don’t keep on top of diet and exercise – later in life it can have devastating effects on you that you try and ‘nurse’ through drugs.

It’s like giving a plaster to someone who got an arterial wound. Sorry buddy, a plaster just isn’t going to cut it – let alone a bandage.

And that bandage (unless it’s sterilized) probably is going to cause its own problems as well (a.k.a side effects).

So. Rant over – just something to consider as you look at your life through this scope of compound interest and returns – well it works both ways.

The Compound Interest Of Writing

This is the part of the blog that actually was the reason I started writing this haha – but I went off on a bit of a tangent because it seemed logical to discuss financial investment first.

The reason for this is – is that if you’re an entrepreneur/business owner or to be honest anyone at all – there’s a big compound payoff to producing content on a regular basis.

From a financial perspective – having a huge body of content is a significant differentiator when it comes to anyone’s hiring process.

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They can simply look back at your historical archive and discover (in my case currently) 100 different blogs that you’ve been about different things you’re experiencing in your life, as well as your insights on whatever range of topics you choose to write about.

It most certainly – and this is content in general – is a differentiating factor when business owners or otherwise choose to look at Pearl Lemon as their potential company of choice as compared to other agency owners.

A competitive advantage (and I encourage you to do the same) is the continuous production of content – especially for those who ALREADY journal and the like (which is basically what this is)

The Financial Returns From Producing Content In The Short Term

I got off a call just yesterday with a new client who sent us £13,800 upfront to commence their SEO and Lead Generation activities – and he specifically said that he was on the hunt for the best agency out there – and he conducted very thorough due diligence when deciding to choose us.

He made several mentions of different content pieces I have online that resonated with him.

This has come up (as I discovered) in several sales conversations my team has had – from people asking ‘I heard Deepak had a hair transplant’ to ‘this guy checked out X/Y/Z’…

And I have NO idea how they’ve found out about me :p

But it has led to deals closed, and the like.

So if I assume 25% of our business is ‘assisted’ by the power of my personal brand, that’s perhaps £5-10,000 a month in a worst-case scenario that’s being driven by my brand – which is fundamentally my content

The Financial Returns Of Producing Content In The Long-Term

Well, at the moment I’m writing one blog per day, and I’m really enjoying it.

I do hope to keep this as a ‘forever’ habit.

I’ve seen several authors regularly produce content over decades…for other people’s websites.

I.e long-term contributors to respected publications.

I actually did this for SEMRush in a way over the last 12 months (hosting/appearing in 25+ webinars).

Imagine if I/you did the same thing for your own PERSONAL (we’ll go on to talk about this) brand for a year?

What value will that produce for you over the next decade if you were to continue doing this in this fashion?

Let’s do the maths first of all –

If I produce 3 blogs a week for 52 weeks a year – that’s 156 blogs.

With each blog being let’s say around 1,250 words that’s 195,000 words of content.

If each blog takes you around 60 minutes to write we’re looking at 156 hours of time which is 6.5 days of non-stop writing.

Let’s assume I’m underplaying it and DOUBLE it. 2 hours per blog – that’s 13.5 days.

Now let’s assume it’s 3 hours per blog. That’s still less than 3-weeks.

So if you continuously wrote for 3-weeks per year night and day – and then stopped for the rest of the year – you’d have almost 200,000 words written.

If you assume you only have 4 good hours per day of writing in you – then suddenly it becomes 39 days – which if it’s workdays only is then 8-weeks.

The value your content will drive as your catalog of content (much like SEO) – will grow logarithmically – you’ll see a lot in the first year (if you’re in a B2B environment like myself – then it’s powerful because companies like to know about the founding team and WHO they’re dealing with).

Over the next 2 years, you might not then see that much.

But this is where the plot thickens:

Combining Mass Content Production With SEO For Outsized Returns

If you were to take what you do with your content and add link-building and brand-building activities to it – then you’d REALLY be onto something…

I take inspiration from people such as Nat Eliason and Sujan Patel. Both of these guys have built 7 and 8 figure businesses that have been powered by the strength of their personal brand content.

Which makes absolutely sense right?

If you develop a blog that generates 20,000 visits per month…what would that do for ANY business you attach such a brand to?

It can become so powerful.

And actually, when compared to any financial investment – the compounding returns come far faster.

It’s a case of sticking with it for 12-24 months (maybe 36?) rather than 10+ years – and then you’ll start to see the traffic and the leads flow.

And once you gain eyeballs and people follow you for your ‘advice’ (I don’t have any lol) and ‘wisdom’ (lol) – you can then turn that into…well compounding income right?

The Compounding Returns Of Building Content Around Your Personal Brand

If you follow me…you may know that I have several business interests.

Building out brands around all of them (like anything) takes time and money.

And in truth – I don’t know how all of them will ‘land’ in 2-5 years from now.

However, with extreme prejudice – I can say that bar my own passing – my name…will not change (even then it won’t ha).

So the biggest brand investment that will drive all others then…is logically your own brand name.

Conor Mcgregor (the most famous mixed martial artist arguably) – is a walking example of what having a strong personal brand can do for you.

He launched his Whisky brand ‘Proper 12’ from a standing start.

And wait for this – because for me (at least) – this was a ‘holy f*cking sh*t’ moment when I looked it up.

In his first year (according to him and the popular press) – his new Whiskey company (in 2019) generated over $1 BILLION (yes with a B) in sales.

That.

Is.

ABSOLUTELY f*cking ridiculous.

Ok. I figure I need to do a longer-form post about the power of personal branding haha.

This is where I’ll extend this ‘rant’ lol.

The Compounding Returns Of Business Reinvestment

The same (as above) applies to ANYTHING you have a long-term involvement with, but in activities that accumulate value over time.

So as with this blog, we have with the Pearl Lemon we are putting together something of a content marketing machine and are trying to do the same with our YouTube channels – where again – content value can compound through the living and breathing online ‘forever’ effectively.

I had a discussion about this with Kent Lewis of Anvil Media today – and he’s specifically said how his business has been driven by his investment into content marketing over the last 15 years.

So – I believe I’ve made my point now haha.