Most people would love to be a millionaire, but how sweet it would be to have $2.66 million! In an article I recently wrote (which you can find here) I outlined the spectacular results that can be achieved from compounding your money over many years. For example, from a standing start at 25 years of age, with a regular saving plan and earning a relatively meagre 7% on funds over a 40-year period, the strategy would lead to an investor being a millionaire by the time they retire.
But what if you want more?
For those investors who want to turn the dial up a notch and prefer the sound of $2.66 million, here's one way to get there…
- Find a way to save $10,000 for an initial investment – this is a major factor in the "supercharge" as it alone will grow into over $450,000.
- Invest $5,000 every year for 40 years – aim to start when you're 25 so you can retire very comfortably by 65.
- Identify a way to produce a return of 10% per annum (pa). This could be achieved by picking stocks yourself or by outsourcing the day-to-day investment decisions to a fund manager such as Perpetual Limited (ASX: PPT) or Magellan Financial Group Ltd (ASX: MFG) who have a history of achieving returns of at least 10% pa.
Such a strategy will ultimately require you to invest $210,000 into your portfolio over a period of 40 years and importantly not take any money (including profits) out during that time. At the end however, assuming you achieved a 10% compound return on your investments, after 40 years you'll be sitting on a nest egg worth $2,665,555.
