Being an adviser since 2006, I’ve had my fair share of questions regarding “why invest?” I’ve undoubtedly shown clients those charts of compounding returns over time with the S&P turning $10k into $20k, and then how, with a little help from dollar cost averaging and some further contributions over time, one can retire with a few million bucks in the bank.

My experience has shown me that showing charts and trying to paint a picture of your future is easily lost on a mid-twenty or thirty something. Yeah, everyone knows retirement matters, but they’ve got things going on now … kids, travel, buying a first or second home, and maybe changing jobs. It’s real. It’s now, and it’s right in front of them.

Today, we find ourselves in the midst of one of the largest supply shocks we’ve seen in decades. 

The argument the Fed is having amongst itself right now is whether the corresponding pricing pressure is transitory or structural in nature. Regardless of whether this inflation spike is here to stay or not—although I’d argue some of it is here to stay—the day has finally arrived and is staring us right in the face as to the importance of compounding. There is no need any more to discuss it with clients in terms of something that is important way in the future.

Have you tried to do a remodel lately? Not only is it hard to find a contractor, but materials are either so far backed up or their costs are so high you are looking at about a 30% to 40% increase year over year. Wanting to buy a bike and hoping for a deal? That’s not happening, assuming you can even find one.

I am currently building a bike rack for an old travel trailer my wife and I are remodeling, and some square rubber blocks we need to complete the job are on back-order. What?!? Since when can you not buy virtually anything at any time? We were trying to have blinds cut for the trailer and Lowe’s hasn’t been able to get a new steel blade for their cutting machine because of supply issues.

Oh, and have you even thought about buying a home lately?

Now, if you have been invested and compounding your money in the stock market over the past decade, you have likely realized returns north of 10% annually. 

And while those returns would not have fixed all the supply chain issues, they would certainly go a long way to helping you be able to afford things that suddenly cost much more than they did just a few short years ago.

If you didn’t, it’s never too late to start. My sincere recommendation to start socking some money away now in an investment account for other future needs that will almost assuredly be compounding in their own right.

This is one key reason why the beauty of compounding returns matters: inflation is real. And while I, like you, may not be enjoying these new higher prices, I do cherish this moment in time where I don’t have to point to some prepared chart about a reality 30 years into the future to say, “This is why I invest,” and hopefully get someone started on their investment journey sooner rather than later.

Dave Gordon is director of retirement planning at Ten Capital Wealth Advisors LLC, in Spokane. He can be reached at 509.325.2003, and dave@tencapital.com

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