All right, here’s the math on this one. Nicole is living off her day time job salary and putting 100% of her side hustle towards investing. She makes $100 per night, twice a week, 52 weeks per year. That’s $200 per week, $800 per month or $10,400 per year invested in index funds from the age of 20 to 30. $104,000 total invested.
She started young so that money has between 35 and 45 years to grow before she’s 65. At a 10% rate of return, her portfolio grows to over $5.6M! This shows the power of focus and investing early.
If you have seen 2% savings account ads and are wondering where to get 10%, the answer is in the stock market. It’s not as consistent as a savings account, but over the last 40 years, the S&P 500 which tracks the US Stock Market has gained about 11.6% per year on average. It can be volatile over short periods, but there has never been a 20 year period where the market has been down.
Buying into the US or world stock markets is easy. You just buy a low fee index fund through an online brokerage like Fidelity, Vanguard, Schwab or Betterment. Check my other posts on index funds, target date index funds and how to open a Roth IRA. :)
And yeah, this doesn’t take into account the impact inflation will have on her buying power, but Nicole will still likely easily be a millionaire by today’s terms which isn’t too shabby.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
via Instagram https://instagr.am/p/CCGy8GMn8mm/
I love looking at these charts because they really squash some of the myths around investing and highlight the benefit of investing in index funds.