What is EROI? This is my abbreviation for “Enhanced Rate of Interest”, or an enhanced rate of return. It is the focused action applied to the Roth money growing tax free that results in an enhanced rate of interest.
At the time I am writing this post, the business news channels are all abuzz over the fact that multiple stock indexes in the United States are hitting at or close to all-time highs. The Nasdaq, S & P and Dow are at great levels, yet the S & P is only up 8.3% year-to-date. By the time you read this post, that may very well have changed. While 8.3% is a good rate of return compared to the rate of return on a certificate of depression – I mean, deposit – offered at many local banks, 8.3% is a below-average rate of return for an individual who wants to grow their retirement savings and obtain an enhanced rate of interest.
Is there risk when investing in the stock market? Absolutely, even if you are in an index fund such as the Vanguard S & P 500 index. Are there risks when doing self-directed retirement account investing in alternative assets? Absolutely. It’s a risk you should know and understand before you take the focused action I spoke of in my previous post that will help mitigate those risks and enhance your rate of return. The result of focused action applied to Roth money should be EROI because you, the account holder, have done the necessary due diligence.
The beautiful portion of the enhanced rate of interest return is that the money can continue to grow tax free investment cycle after investment cycle because of the power of the Roth account. When you escape the negative drag of taxation, additional investment earnings can be redeployed into future investments. The compounding growth of such investment activity is vastly superior to investment activity that is subjected to taxation.
Hopefully the technical stuff I must cover in these posts doesn’t keep my passion for self-directed investing from coming through in my writing.