Friend, I am glad that you are thinking
of a 20 year investment horizon. None can suggest you a single stock that you
can invest and forget about for 20 years. Of course there are stock of great
corporations but at what price are they available in the market? If you buy the
stock of an excellent company at a very high price, you as an investor will not
benefit. Under the circumstances, You have two options before you, as follows:
1. You may learn ‘Value Investing’, in
which case please buy the best book, ‘The Intelligent Investor’ by Benjamin
Graham and get started immediately. You may visit my blog atValue Investing.
2. If you do not want to spend a lot of
time on investing, you may simply invest your corpus in an ‘Exchange Traded Fund
(ETF)’ that mirrors a popular index like DAX, Dow Jones, etcetera or any good
mutual fund.
Now the most important aspect of
investing begins. You simply forget about the investment till 20 years.
Following table shows what your
investment could be if it is able to generate a compounded annual growth rate
(CAGR) of 15% per annum or 1.25% per month, which is very much possible.
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| Future Value of Investment |
I have
assumed an annual inflation rate of 9.96%, which is probable in India, where I
live, but in the US it is very unlikely. So, if the inflation rate is 2% per
annum, you will end up with a net future value of US$ 911,208, quite a
significant sum.
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