This is how most rich people get rich. Slow and steady, regular contributions to their investments over long periods of time. It’s not flashy, it’s not exciting, but it has worked for over 100 years. The amount invested in this example is only $120,000 but the final value is over 10x more!
The math on this assumes 10% per year growth of your investments. That’s about the average return of the US stock market over the last 100 years. This doesn’t account for inflation (meaning in 40 years $1.4M won’t buy the same amount of stuff as it does today) BUT this example also doesn’t account for increasing your monthly contribution with inflation and with your job growth. So, broad strokes, you will end up with a lot of money if you invest like this.
Notice how at year 20, you’re not even close to half way. That shows the powerful effect of compound growth. Time in the market is so valuable because it gives your investment time to snowball bigger and bigger. (At year 50 this investment is up to $3,840,898!) So don’t wait to get started. As the Chinese proverb says, “The best time to plant a tree was 20 years ago. The second best time is now.”
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.