Ingredients of Wealth Creation

During your service in the military, the primary goal of long-term investing is to create personal wealth. If you save smart during your working years, you will be able to retire when you want to and afford to live how you want to. The amount of money required to achieve this end varies based on your goals (the "when" and "how" above), but the method to acquire the wealth remains the same.

There are three basic ingredients needed acquire wealth. Explore each of them to discover how they interrelate, which you control, and how to influence those you don't control.  If you'd like to better understand the concept of 'wealth' before we begin discussing how to create it, just click here...  

Saving Rate

Savings rate is the percentage of your pay that you save - the bucket you use to remove savings from the income stream. Since people earn different amounts, it's best to discuss the rate of saving rather than amount saved. In this section, we'll explore different savings rates and how they relate to the 'return/risk' and 'time' factors to create wealth. 

Return / Risk

Return is the shortened version of 'rate of return'.  It is simply the percentage gain or (loss) produced by an investment over a period. Investments have expected returns (aka historical returns or average returns). 'Risk' involves the chance that the actual return fails to match the expected return.

Time

Time, or more precisely time horizon, is the distance in the future where you will stop creating wealth and start consuming wealth. In other words, when your investment account changes from a place to "put" money into a place you "get" money.