Does anyone knows how university maintain or even increased their endowment though no one has donated to the university and they also incurred expenses?
The answer is that they invest the money so they would hope to cover the expenses and inflation to maintain their purchasing power.
How? Some universities have an endowment of 1 billion dollars and if they invested properly, they would have gain roughly 12% a year(based on the average returns of the US stock market since it was open). This means that they can earn 120 million a year without putting in any work. Can a cleaner earn even 1 million in his lifetime?? Lets say inflation is 2% and expenses incured is 80 million the total cost for the year is 100 million and another 20 million is added to their portfolio.
The above example is what I will be saying today. The world is never fair. The rich can enjoy life and still earn a hell lot of money if they invested for the long term and ride out the volatility in the financial market. Lets say if I have 100 million, what would I do? If u spend all, u are a no brainer! Invest it and always remember invested it. A 100 million invested in the financial world can make the 100 million perpetual. Lets say I invest in one of the most safe securities,Bonds, the average return is about 6% a year. This means that I have earn 6 million dollars though I did not work for the year. But lets say my purchasing power decrease by 2% because of inflation, I still make a 4 million dollar profit and that is equilavent of what a CEO in a huge coporate earns a year but just that I did not have to work. May I know if any teacher in a primary school earn that much in their life??
The next is the poor, though they invest, they money earn through investing is barely able to cover their everyday needs. Their money invested cannot accelerate fast enough like the rich people. They worked their whole lifetime and sometimes under stressful conditions but their income is still peanuts while the son of a multimillionaire or a billionaire just invest the money and they can enjoy their lifetime without working and still earn a hell lot of money or maintain their expensive lifestyle. If a poor only invest $100,000 in stocks and the stock market return is about 12% as mention above, and may I ask if how the 12,000 be spent?? Buy ferrari like the rich people?? No way the 12k probably could cover his family utilities and water bills if he chose not to invest the 12k again and didn't let it compound.
This is capitalism! Face it! The weakness of capitalism is that the rich gets richer without working while the poor gets poorer though they are smarter, more hardworking and work for their whole lifetime then their billionaire counterparts.
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