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bakman is a billionaire and one of the best value investors in the world in 2020 he made $2.6 billion after Bing 27 million against the pandemic and he also shared with us one tip on how kids can retire millionaires with just one investment from birth in this video I'll explain you why tip should be highly considered by parents or soon to be parents and how your baby can benefit from it so let's Dive In as parents we often plan to support our kids with money until they are in their 20s and can manage their finances on their own the reality is many grown-ups struggle to save and invest enough for their retirement a recent CNBC article pointed out that over one American out of two feel that he won't have a comfortable retirement so as parents are soon to be parents how can we ensure our new borns financial future with a single investment that could turn them into a millionaire when they retire bakman a billionaire and Top Value investor recommends investing $6,750 into the top 500 American companies when your baby is born and letting it grow until he or she is 65 years old and there are three solid reasons that bu is advice reason number one this investment allows your newborn to benefit from the increasing value of the top 500 American companies over time through compound growth reason number two this investment is supported by waren Buffett strong belief in the future of American businesses reason number three this investment is a long-term bet on stocks which are the safest investment option over a very very long period of time let's dive into each of those points one by one to get them better two important Concepts help to explain how your new Bond can benefit from the growing value of the top 500 American companies over time those two important concepts are exchange tradit fund of often called ETF and compounding just like a box of chocolate contains different type of chocolates an ETF holds a mix of stocks each chocolate in the Box represents an individual stock within the ATF the entire box is like the ATF itself as it contains a combination of different stocks all packed together because each stock represent a company an ETF lets you invest in multiple stocks at the same time instead of just one as an investor you can buy an ETF that invests your money in the top 500 American companies that are tracked by an index known as the S&P 500 it's a way to own shares in Google meta Apple Tesla Microsoft and 495 other companies that are part of the S&P 500 if you buy $100 of this ETF your money will be split among those 500 companies based on their respective weights in the S&P 500 Index as of August 2023 the 10 largest stocks of the S&P 500 represent about 31% of the index total value so this mean that $31 out of your $100 will go towards those 10 companies in the S&P 500 every quarter the S&P 500 rebalances which means that new companies are added to the index and some are removed think of it like a soccer league where the worst teams from the first league go to the second league at the end of the season and the best teams from the second league move up to the first League this ensures that your newborns investment is always kept with the top performing companies in the US this is what we call passive investing as you let your investment sit there to grow without actively choosing and picking individual companies once you are invested in those companies through s&p500 ETF your investment will track the performance of the S&P 500 this means that if the S&P 500 Grows by 5% in a year your investment will also see a similar increase if we look at the performance of the S&P 500 from 1928 to 2023 which is roughly 100 years the average annual stock market return adjusted for inflation is about 8% to grasp why such a growth rate over a long period of time is amazing we need to understand our second concept which is compounding think of compounding like painting a magic seed in the gas when you water it the next day not only does the seed grow a bit but it also Sprouts more seeds as you keep watering and caring for the plants your garden becomes filled with more and more plants just like how compounding makes your Investments grow over time now that you understand the concept of compounding what would you pick if I ask you would you like to have $1 million right now or a penny that doubles every day for 30 days choosing the $1 million would be a huge mistake as you would miss out on almost 10 million with that choice this table shows that when you choose the option of doubling your penny daily for 30 days you are disappointed by your choice during the first 25 days as the amount remains below $400,000 but once you hit that Turning Point the power of compounding kicks in once you pass that Turning Point the penny that doubles every day for 30 days becomes approximatively 1.3 million on the 27th day and around 11 million on the 30th day the biggest advantage in investing is Time and Time becomes your ally when you let your money grow for a long period of time compounding is the secret Source supporting baa command tip your 6,750 invested when your baby is born becomes a million when he or she turns 65 assuming the S&P 500 continues to generate an average annual return of 8% adjust for inflation by keeping this money invested for 65 years without ever taking it out you give compounding enough time to work its magic while the S&P 500 has grown by an average of 8% adjusted for inflation during the last 100 years it's really difficult to guess the future in investing the big question raised by Bill amman's tip is can the S&P 500 continue to grow at an annual rate of 8% adjusted for inflation over the next 65 years during the last 20 years where beet has repeatedly said that you should never bet against America despite all the challenges that they're facing it strongly believes that the future of American businesses is bright say that our underlying premise and I think it's a pretty sound underlying premise is that this country will do very well um and and in particularly it will do well for business business has done very well you know the Dow went from 66 to 10,000 Plus in the 100 Years of the 20th century and we had two world wars and nuclear bombs and flu epidemics and we you know you you name it cold war there's always there always there's always problems in the future there are always opportunities in the future and in this country the opportunities have won out over the problems over time we're almost always about fire of stocks over time I mean we I have no idea where they're going to be in 10 days or a year or two years but over time we we'll do very well America you can't really mess with America we've got the secret sauce and doesn't work all the time perfectly but you just look at where we go Milestone after Milestone and never bet against America one be Fett's view over the future of American businesses is strongly supported by his credibility when it comes to long-term invest if we consider his investment performance since he took over his company he achieved a remarkable 19.6 annual growth rates over 57 years from 1965 to 2022 this means that if you had invested $1,000 in his Company's stock in 1965 you would have $25 million today in addition of his positive views on the long-term prospects of American businesses Buffett also favors passive investing Buffett has supported the effectiveness of this investment strategy on many occasions he suggested that most individuals are better off investing in a lowcost Index Fund which often includes ETFs uh so this time I went back uh actually to 1942 when I bought my first stock as an illustration of all the things that have happened since 1942 we've had we've had uh 14 presid president seven Republicans seven Democrats we've had we've had world wars we had 9/11 we had the Cuban Missile Crisis we have all kinds of things the best single thing you could have done on March 11th 1942 when I bought my first do would just buy an index fund and and and never look at a headline never think about stocks anymore just like you would do if you bought a farm you just buy the farm let the let the tenant farmer run it for you and I pointed out that if you'd put 10,000 in an index fund that reinvested dividends and I paused for a moment to let the audience try and guess how much it amount to and it would come to $51 million now and the only thing you had to really believe in then is that America would win the war and that America would progress as it has ever since 1776 and that American Business If America move forward American Business would move forward you didn't have to worry about what stock to buy you didn't have to worry one day to get in and out you didn't you didn't know the Federal Reserve would exist whatever it might be and uh uh America Works while billman's tips seems to be backup by the world best investor it is also a bet on stocks which are known for being the safest investment option over a very very long period of time when you choose an investment it's important to ask yourself the question if any other type of asset class can help you to better achieve your goal an asset class is just a category of Investments like stocks or real estate if we use this approach for our topic you might naturally ask yourself to secure a million doll retirement for our newborn is it a good idea to invest that $6,750 in stocks gold bonds or some other type of investment we can answer this question by looking at how those assets have performed in the past over a long long period of time the good news is that we can refer to a study from Jeremy seagull from won business school that has been published in 2015 by lelu who is another great value investor this study shows that stocks have outperformed cash gold and bonds as the best performing asset class over 200 years from 1802 to 2014 if you had invested $1 in cash in 1802 it would only be worth cents in purchasing power by 2014 said differently cash has lost 95% of its value in purchasing power over 200 years because of inflation if you would have bought $1 worth of gold in 1802 it would be valued at $312 in 2014 if you would have put $1 into treasury bills in 1802 which are considered one of the safest Investments it would have grown to $275 by 2014 treasury bills are bonds issued by the US government and a bond is a way for the government or a company to borrow money promising to repay that borrowed money along with some extra money over time if you had invested $1 in corporate Bonds in 1802 it would be worth $1,600 in 2014 many believe that stocks are riskier investments compared to other type of assets and are less likely to maintain their value this might be true for short-term Investments but the study reveals that if you had invested $1 in the stock market in 1802 it would be worth 1 million in 2014 after adjusting for inflation the secret behind this amazing result is our Bud Mr compounding as the stock market average a 6.7% return adjusted for inflation from 1802 to 2014 stocks have not only been the best investment option but they have outperformed all other asset class combined in that study this means that if you add up all the gains from every other asset class and compare them to stocks stocks are the clear winner by a significant margin real estate which was not considered in this analysis sometimes seems to be a better option than investing in stocks some of you might think that investing in real estate is a better option versus investing in stocks over a very long period of time so let's look into it in the past the stock market has shown higher growth compared to the real estate market making it a superior option for growing your money if you planning to invest money for your newborn's retirement stocks seem to be a better option than any other type of assets this is it for today guys if you got some value from this video feel free to drop a like and 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