Investment Strategy

[zach121091]

Hi all -

Very new to investing and very young (19). I had an idea that I wanted to get some more opinions about to see if it's actually possible

What I want to do is gather say a group of 25 or more people if possible, just friends and people I'm close with, to all pool our money together and invest in index funds (generally stable and low fees I think?). Say if each person put in $5,000 that would be 125,000(25x5,000=125,000)

I want a general agreement that we won't touch the funds for at least 10 years.

With those starting funds we would let them sit for a year, and then at the start of the next year each person would invest another 2,500 and so on year after year.

Lets say each year the overall sum grows 7%

Year 1 - 125,000 x 1.07 = 133,750
Year 2 - 133,750 + 125,000 = 258,750 x 1.07 = 276,862
Year 3 - 276,862 + 125,000 = 401,862 x 1.07 = 429,992
Year 4 - 429,992 + 125,000 = 554,992 x 1.07 = 593,841
Year 5 - 593,841 + 125,000 = 718,841 x 1.07 = 769,159
Year 6 - 769,159 + 125,000 = 894,159 x 1.07 = 956,750
Year 7 - 956,750 + 125,000 = 1,081,750 x 1.07 = 1,157,472
Year 8 - 1,157,472 + 125,000 = 1,282,472 x 1.07 = 1,372,245
Year 9 - 1,372,245 + 125,000 = 1,497,245 x 1.07 = 1,602,052
Year 10 - 1,602,052 + 125,000 = 1,727,052 x 1.07 = 1,847,945

1,847,945/25=73,917

So after ten years each person will have invested 5,000 x 10 = 50,000

Each person will have made about 24,000 in interest.

If each person decided to invest alone and not pool money this is how it would look.

Year 1 - 5,000 x 1.07 = 5,350
Year 2 - 5,350 + 5,000 = 10,350 x 1.07 = 11,074
year 3 - 11,074 + 5,000 = 16,074 x 1.07 = 17,199
Year 4 - 17,199 + 5,000 = 22,199 x 1.07 = 23,752
Year 5 - 23,752 + 5,000 = 28,752 x 1.07 = 30,764
Year 6 - 30,764 + 5,000 = 35,764 x 1.07 = 38,267
Year 7 - 38,267 + 5,000 = 43,267 x 1.07 = 46,295
Year 8 - 46,295 + 5,000 = 51,295 x 1.07 = 54,885
year 9 - 54,885 + 5,000 = 59,885 x 1.07 = 64,076
Year 10 - 64,076 + 5,000 = 69,076 x 1.07 = 73,911

So if you invested alone you would have put in 50,000 and gained about 23,000 in interest.

I guess what I thought is if more people invested together they would make more interest because of compound interest but it seems if you invest alone or with others you still will come out equal in the end?

Does this seem right and can anyone point out any errors?

Thanks

Zach

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