Getting rich and gaining that ‘millionaire’ status is a dream of most Australians, and yet very few people ever manage to achieve it. That’s often because other things in life just seem to get in the way. I’m talking about the gas and water bills, the mortgage, family holidays and payments for the children’s education. But what if I was to tell you that you can make an easy million dollars, and still manage to cover all those expenses? In reality, it really isn’t that difficult to achieve. All it requires is some patience, composure and a little self…
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Getting rich and gaining that ‘millionaire’ status is a dream of most Australians, and yet very few people ever manage to achieve it.
That’s often because other things in life just seem to get in the way. I’m talking about the gas and water bills, the mortgage, family holidays and payments for the children’s education.
But what if I was to tell you that you can make an easy million dollars, and still manage to cover all those expenses?
In reality, it really isn’t that difficult to achieve. All it requires is some patience, composure and a little self control.
A large deposit isn’t even necessary. In fact making what would be considered a small investment today could see you become a millionaire in just 20 years!
Below, I’ll show you exactly how this can be achieved…
But first, I want to reiterate that this is a very lazy way to become rich. Most of the time, all you need to do is sit on your hands and let your money do all the hard work for you.
That’s where the self control and patience elements come in…
The stockmarket can be a volatile place, and those investors who crack under pressure are much less likely to succeed at becoming a millionaire.
That’s because the real gains are made over the long term – ignoring the market’s fluctuations and choosing quality stocks to guide your wealth higher over the years.
Even though those fluctuations can sometimes be downright scary, it is important to remember that the Australian stockmarket has managed to rise, on average, 12% per annum since 1900.
That’s even through the Great Depression, the dotcom bust and the more recent Global Financial Crisis.
Needless to say, 12% per annum certainly beats the returns that would otherwise be made from term deposits or government bonds.
By now I’m sure you just want me to tell you how you can make your fortune, so here’s how…
All you need to do for now is set $10,000 aside to invest in the market – completely ignoring the fact that the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is trading near a six-year high – and then deposit another $1,100 into your portfolio on a monthly basis.
I know that might seem impossible now, but that small sacrifice could be truly life changing…
Remember when I said the market had risen an average 12% yearly since 1900?
If you were to employ this method for one year – initially setting aside $10,000 and making deposits of $1,100 monthly – your portfolio would be worth $24,400 after one year.
Extend that over five years, and you’d be boasting a portfolio worth $101,481.
Already, you can see the gains are starting to pick up the pace…
Now, if you were to keep making these monthly deposits for 20 years, you would have a portfolio worth $1,047,555.
And that’s if you were keeping level with the market’s returns – of course there is potential to beat the market, if you consistently pick the right stocks (I’ll show you a little more on that shortly too)…
For instance, say you averaged 15% per annum instead. You would have your first million in a little over 17 years, while you could have $1,515,921 in 20 years.
That result would require a total outlay of $364,000 over the 20 years, while a massive $1,241,921 would be received in returns.
And this is all made possible by the phenomenon of compound interest. Making your money work for you – and all you need to do is pick the right stocks!
It now seems like the big gains are going to be made from other ASX stocks…
For instance, earlier in the week, we released two articles outlining the 4 stocks we would buy if we had $10,000 to invest.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.