I calculated that if you get at least a million or two by investing a thousand bucks a month over 20 years. Of course thats your investments grow 6 or 8% every year.
This of course grows exponentally if you increase the amount of money per month.
Why arent most people doing this? Do addittional fees not included in my calculations make it impractical or is keeping 6-8% ratio impossible?
It seems rather easy way to get wealthy, at least on paper. Too good even, there must be something beneath the surface
It's easy if you are disciplined in saving and moderately sensible about investing. I did it.
It's really hard if you habitually spend more than you make, if you fall for the latest investing fads (hello, cryptocurrencies), pick your stocks from something somone mentioned on Veeky Forums, treat the stock market like it's a lottery, dive headfirst into complex strategies (mostly involving derivatives), panic at the first sign of trouble, get greedy near the top of the market, and steadfastly refuse to learn from your mistakes.
Regrettably, there are a lot of people like the second description.
Alexander Martinez
Lots of people live beyond their means and don't know that you're supposed to save 10-20% of every pay check if you don't want to be a slave forever. (((They))) like it just fine this way, so our culture glorifies wasteful spending and mindless consumerism.
Ian Taylor
You sure cryptocurrencies aren't viable, or do you just mean memecoins? Seems like you can just hold onto something like BTC or ETH like you would gold/silver and just make money.
Otherwise, what investing do you specifically consider to be a sensible investment for middle class? Blue chip dividends?
Joseph Moore
Lots of people are stubborn about crypto because it's filled with scams and even the """smart""" money has a habit of falling for these, sometimes even intentionally buying into them to ride pumps and just praying they'll get out near the top. You absolutely can make money on it, but you have to be judicious about which shitcoins you buy.
Blake Martin
>You sure cryptocurrencies aren't viable, or do you just mean memecoins?
"Viable" is a little vague. Crypto is fascinating and one or more of them will survive. But have you checked the volatility? And besides which, crypto like other currencies doesn't actually MAKE money, it IS money, and thus is essentially a zero-sum game. They're a bad investment for the long term in the same way that forex is not for long term investors.
>Otherwise, what investing do you specifically consider to be a sensible investment for middle class? Blue chip dividends?
Total US stock market index plus a few % in bonds would be an excellent starting place. (What percent depends on your age and target date.)
Add foreign stocks and REITs and you are pretty damn diversified. If you want to elaborate, add a few percent in gold and/or commodities (not much) and you're good to go.
If you want to divvy up your asset allocation more, you can get separate allocations to small vs medium vs large stocks (I do this).
Being diversified not only leads to less overall volatility but adds to the long term bottom line.
I know it's a lot less exciting than putting half your money in BTC and half in penny stocks, but it's a hell of a lot more likely to make money in the long run.
Kayden Thomas
>crypto like other currencies doesn't actually MAKE money
I should have said "except for miners", but I thought that was obvious.
Nolan Davis
The average American can't handle an unexpected $500 bill, user. Just think about that for a minute.
Liam Phillips
You've also calculated incorrectly. It takes 313 Months or 26.1 years to hit your first (nominal) million if you put down a $1000 per month every month and make an annualized 8% return.
If one factors in 3% inflation (the long-term average) the results are even more disappointing: it will take 33.3 years to hit 1 million at 8% nominal returns.
Noah Moore
Hmm
I didnt really bother finding online calculators so I used (n+1000)*1.06 where n is the sum of previous calculation.
What is it missing? Bot that I have taken classes in math regarding economy and finance
Josiah Taylor
I mean the true formula you should use is: (n+1000)*(1.06)^(1/12) since you add 1000 each month but I don't get similar numbers (see pic.)
Whatever, It doesn't really change your point.
Samuel Miller
HISTORICAL RETURNS ARE 8% REAL STOP BRINGING UP INFLATION EVERYTHING IS ALWAYS IN REAL TERMS
Christian Ward
ur a dumbass.
what you are trying to do is basically the baseline to retire for 60. its also hard enough that 90% of people don't pull it off.
Ryder Reed
Over what time period are you considering?
This is a plot of the average annualized return on the S&P 500 over the preceding 20 years including reinvested dividends and the ratio of CPI i.e. the last data point I recorded 3/31/2017 represents the average yearly return on the S&P from 3/31/1997 to 3/31/2017
While there was a period in the recent past where the returns were significantly greater than 8%, there also was a period prior to that where it went almost to zero. The average since 1970 is 6% not 8%.
>7% adjusted for CPI Granted it's higher than the figure I gave which isn't surprising because it includes a different time period.
If you had invested in 1962, your real annualized return would have been 0% over the next 20 years. If you had invested in 1980 your real annualized return would have been 14% over the next 20 years. Point being, that the real average rate of return is so dependent on time period that it's not terribly meaningful to debate percentage points. And even given an agreement on historical returns, estimating future returns based on past returns isn't really meaningful unless you can tell me whether the next 20 years are going to be like the 60s and 70s or the 80s and 90s.
My original point was that OP's math doesn't work out taking his assumptions as given i.e. with 8% real returns it takes you 26 years to make it to 1mil not 20 which is significantly longer.
Carter Smith
this. setting aside the money is straightforward enough, where to put it is the big question and whether or not that actually works out is the reality. most middle class people at least here will be invested in their home, likely a second property and maybe some kind of term savings and a few blue chip shares.
Michael Williams
Because of liberals
Owen Perez
This makes me wonder. If there was an obligatory and inheritable investment account that allows only index-based funds, would that create a natural "universal basic income" for massive part of population after 1-2 generations?
Matthew Williams
You don't even need to invest to gain 8% a year. You can just lend it out. (best places I know to lend it out are exchanges like Bitfinex where you can around 0.04-0.06% interest on BTC PER DAY and 0.02-0.0-4% interest on USD PER DAY.
So if you have 100 BTC and earn around 0.05% a day then that's over 18% more BTC per year if you took out the interest every month. Compounded it's even more. Now if BTC also happens to go up like 10% or more that's some nice winning. Or play it safe and use USD and still get like 12-17% a year
Jack Edwards
this is only an argument for a lump sum normal folks contribute for the duration of their working lives inflation is totally irrelevant
