How Can I Become a Millionaire Quickly?

Actual Question:

I am 22. What can I do to become a multi-millionaire in the next 25 years?

I am a realist. So I am very cautious when I buy something. I read annual reports of companies, look at financial statements and calculate my intrinsec value of stocks. I beated the market (no leverage) in 2 years of experience. But getting rich quick is a dream. Should I keep investing in stocks?

Answer:

Dear Friend!

I am extremely glad to know your approach a in investing so far. I am also glad to know that all this you have achieved at such an young age! But you say that getting rich quick had remained a dream. My friend, let me assure you that getting rich quick had remained a pipe dream for a vast number of people in the past and will remain so in the future also.

My guru Warren Buffett says, “Certain things take time in life, and you cannot do anything. You cannot get a child in one month by making nine women pregnant.”

Why is it so?

What actually creates lasting wealth is not the investing acumen - but simply time.

Graph Depicting the Miracle of Compounding

You can see how the line is climbing steeply after 30 years!

In reality, a very long time and the miracle of compounding are the vital ingredients behind immense riches and wealth.

Even Warren Buffett, one of the richest men in the world today could only build his immense wealth only over 35 years. Please see the following table which shows how investing humble sum of Rs.10,000 every month in stocks can produce immense success over a long time.

So my sincere advice to you, my young friend is that from your own words you are on the right track and doing extremely well. Just keep it up for the next 38 years and by 60 you must be an unimaginably rich and wealthy person.

Thank you,

Anand

What Investment Results to Expect for Rs.25000 per month

Actual Question:

What are the best investment options if I can allot Rs.25, 000 every month for a period of 10 years?

I am a single male, currently 27 years old, living abroad and would like to have returns when I am 40. Please provide options where I don’t want to spend my time much (ex: stock market) but get maximum returns. Thank you in advance.

Answer:

Dear Friend!

Your current age is especially favourable to earn very good returns over a long period of time, without having to spend any time at all.

Please invest the sum of Rs.25,000/- every month in a well diversified index fund .

However your investment horizon of just thirteen years is insufficient to produce spectacular results. Please understand that in investing it is really not the accumen that produces results, rather it is time - very very long time. Over such long periods of time the universal law of the ‘Miracle of Compounding’ will work for you and produce extraordianry results.

Here I present what results can be expected over 13 year and 33 years investing periods for the same Rs.25,000/- per month.

From the above it can be seen that while the investment period has approximately merely trebled, the corpus after compounding has gone up by about 50 times. This is the power of compounding over very long periods of time.

In the above example the returns from stock markets are assumed at 15% per annum and inflation at 10% which is on the higher side in the present circumstances.

I am sure you have already decided to extend the investment horizon to 33 years?

Thank you,

Anand

How much Wealth Can I, a 32 year Old Create with a Monthly Investment of Rs.10000?

Full and Actual Question: I am 32.  One child.  Salary is 36K.  Saving 12.5k in public provident fund. Paying 12.5k for a loan. I want to invest other 10k, but how?

Answer:

You seem to have an investible surplus of Rs.10,000 per month which is quite decent. Your present age of 32 also very good with an active investing life of about 33 years and another 10-15 years even if you do not invest you may keep alive your past investments. It would have been much better had you asked this question when you were 22 years old. Anyway, let us keep a target of about 85 years as your investment life, which is simply superb.

Try to get rid of your debt repayment obligation of Rs.12,500 per month as soon as possible and after that try to avoid borrowing money. Please destroy the credit card(s), if you have any, immediately.

I am surprised to see that there is no significant allocation for home expenses? Perhaps your spouse is taking care of them?

Open a SIP in a well-diversified index mutual fund or invest in an Exchange Traded Fund (ETF) for the next 33 years. Do not stop this investment for any reason whatsoever. See below what magic the ‘Miracle of Compounding’ can do for you.

Example Showing Investment Results in 33 Years

If you follow this simple advice keep invested for the time frame suggested, when you look back at the age of 65 you would have accumulated a net wealth of Rs.7.92 crores, after an assumed annual inflation of 10%, which is very high and long term stock annual market returns of 15% which is very reasonable.

If you keep the investment alive, without disturbing for another 20 years, you would have become a really rich and wealthy person with a net wealth of Rs.98.61 Crores.

Happy Investing and Getting Rich Soon!

Related Links:

• Mutual Fund
• Exchange Traded Fund (ETF)
• Mutual Fund-Video