The good news is there are plenty of ways to joins the ranks of the world's billionaires. The following four ways are far from an exhaustive list, however the fourth way – give or take a decade or two depending on your starting point and annual return – is attainable by all.
Firstly, you could try your luck at winning a MASSIVE lottery. I suggest the Christmas Lottery in Spain would be the way to go. In 2012, the division one jackpot was US$942 million – just a rounding error to billionaire status!
Secondly, try and get yourself some well-funded family connections. Executive Chairman James Packer of Crown Resorts Ltd (ASX: CWN), who is a regular rich list member, received a handy head start thanks to the foundations laid by his parents and grandparents.
Thirdly, invent the next Facebook Inc (NASDAQ: FB).
Fourthly, utilise the power of compounding. Obviously the first three ways have a very high miss rate as chance plays such a big role. However a stringent savings regime, a very good – but not impossibly good – average annual return on your investments and a long runway of time, make it possible to compound your way to billionaire status.
Consider the maths: $500,000 re-invested at 16.4% per annum will grow to $1 billion in 50 years.
While 16.4% is an outstanding return, numerous investors around the world have proven it's possible to achieve. Some of these top investors are even kind enough to invest on behalf of others! WAM Capital Limited (ASX: WAM) has returned 18.3% per annum (pa) before fees since inception in 1999, while Platinum Capital Limited (ASX: PMC) has returned 13.2% pa after fees since its inception in 1994. Although at 13.2%, a $500,000 investment will take a little longer to grow to our $1 billion goal, even 61 years of compounding is possible in a lifetime.
Foolish takeaway
It's almost inbuilt into the human psyche to want things yesterday and to dream of getting rich quick. When it comes to investing, trying to take shortcuts is bound to lead to mistakes and real losses. Utilising the power of compounding, while it won't turn you into a billionaire overnight, may get you there in the end!
