• Smart Investing

Starbucks Coffee or Starbucks Stock?


Many financial advisors suggest that you skip that daily (or twice a day) Starbucks as a way to put money aside and save. But we thought it would be fun to look at what would happen if, instead of just saving your money, you invested it in Starbucks stock instead of buying that Venti Mocha Frappuccino.

Let’s assume you spend $4 each time you go to Starbucks and instead of buying coffee you save that money and buy Starbucks stock (NASDAQ:SBUX) at the end of each year. If you’ve been buying Starbucks 2 times a day for 10 years (weekdays only), you would have invested $2,080/year in Starbucks stock. To make the math easier, we’ll assume you are only investing once a year after saving for a year, although the returns would be higher if you actually invested every month or every week.

Starbucks has performed well over the last 10 years, although they have been flat for the last few years. The company also provides a dividend so that the return on investment is not only the capital gain in the stock. For purposes of our calculations, we assume that you reinvest all your dividends.

We used a program that calculates the return, including dividends (with reinvestment) for stocks. You can give it a try here:

https://dqydj.com/stock-return-calculator-dividend-reinvestment-drip/

The results are as follows. As you can see, because of the growth in the price of the stock in the early years and the benefits of compounding returns, the $2,080 you invested 9 years ago (remember that you save money for a year before investing) is now worth $13,521. Adding it all together, you could have saved over $50,000 by avoiding those Starbucks coffees. Order two a day? You might not want to think about it.

Now feel better by getting a nice Mocha with some whipped cream on it.

#investing #StockMarket

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©2020 BY SMART INVESTING FOR CANADIANS

All articles herein are presented as an educational resource and should not be considered as professional financial or individualized investment advice. Readers should always exercise their own judgement when making any decisions about their money.

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