Opinion: Value of blue-chip relationships


Although the specific attribution may wobble a bit, it is likely that famed turn-of-the-last-century German-born theoretical physicist and all-around smart guy Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” As in most things, the crazy-haired thinker was right on target.

If we could have managed in 1993 to put $1,000 into our stock market’s Dow Jones Industrial Average and left it there until today, we would be able to walk up an ATM and extract almost $14,000, so much that it might take a while to get it all, given the daily automatic teller cash withdraw limits. Still, increasing 14 times is remarkable. Adjusted for inflation, it would still bring $8,600. Incomes, depending on who you ask, during the same period increased between 125 percent and 150 percent. Not adjusting for inflation, 1,400 percent in the market beats what we might have managed in working, which produced less than 1 percent of the growth.  There has been much said about how the benefit of these kinds of returns may not be available to all and that there are countless specifics to be considered.  Yet, the math is irrefutable.

What other investments might likewise produce outsized benefit? Is it better to own household objects longer, business assets, land or automobiles? The equations may vary, but what of pets, people and institutions? If old friends are indeed the best friends, why? Are long-term relationships like investing in an early retirement plan? Are the dividends beyond what we’d likely find in other forms of income? Is a 40-year marriage more valuable than one of 10 years? Perhaps it depends on the stocks purchased and the investment discipline followed. Are we hanging onto our blue-chip relationships or risking a tech bubble?