How to retire with a Million Euros
This is how you can retire with one million Euros without knowing anything about the Stock Market!
True, this title might seem a bit overwhelming, but after reading a bit further you’ll clearly see how by combining a few simple facts, which have been scientifically proven, any individual, and we truly mean anyone, even with absolutely no background or previous knowledge in investing, can earn significant profits and can retire with no less than one million Euros.
Before we discuss the scientific formula, (and don’t let the word “Scientific” scare you- we’re talking about 7th grade math, best case scenario). It’s important to understand a few basic facts which will work to your advantage. These facts have nothing to do with previous or current understanding of Securities, the Stock Market or any other kind of investment.
Scientific formula for the purpose of Capital growth – is it real?
You can even check it out for yourself by using the Compound Interest Calculator, which appears on the bottom of this article (Note: It’s very important to read the whole article before moving on to the Calculator).
The formula includes these following components:
- The amount of time one is invested, until pension.
- Interest rates, yield that you acquire on average per year.
- Sum of the first investment.
- Sum invested monthly, quarterly, yearly.
1. Investment time of the remaining years until pension:
The first important bit of information needed to comprehend the Capital Market, the most crucial aspect of an investor, is the element of time. Throughout the years, hundreds of statistic surveys have been conducted, all following the results and yields of the global Stock Markets. The undisputed conclusion is that the longer time period one is invested, the chances of loss diminish. When reaching the time frame of 15-20 years and more, not only is the chance of loss non-existent, the yields made are always positive.
In other words, losing money in the stock market over a long period of time requires a lot of talent, and that’s assuming you invest in indices and other proven investment channels as well. If you planned on investing in a startup company, a startup which could potentially be unsuccessful, you in essence left the investment world and moved to the gambling/ business world. In which case the formula we will soon present will be of no use to your situation.
2. Interest, yield that you acquire on average per year:
The second component working in your favor, is Compound Interest. As Albert Einstein once said: “Compound Interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it.” If Einstein said it, he knows what he’s talking about. The leaps in profit, over a period of time (annually), when you don’t touch the funds and let it gain compound interest, will make even a modest sum grow to become an inconceivable revenue.
3. The initial investment sum
The primary investment sum is of the utmost importance, seeing as how it gives the initial push to earn high profits for the coming years. In effect, it’s the spark to light the fire.
4. Amount of the monthly /quarterly/ yearly investment
If the initial investment sum is indeed the spark that lights the fire, the additional investments keep the flame burning and growing. This sum, is an uninterrupted, constant deposit either monthly, quarterly or annually.
The above investment mentioned is essentially a periodical investment which can be added either weekly, monthly, each quarter or each year without cease. The higher the investment, the higher the profits at the end of every period. It is preferred that the amount you invest in each period of time, is a sum that is available to you with your financial situation, as to not be felt as a “loss” to you.
Now, that you’ve comprehended the strong components working in your favor as an investor, all that is left is to do is figure out how to make all of these components work together, combined and unified to reach the scientific formula that will generate one million Euros by the time you retire.
The investor’s best friend – Statistics
The chart which appears below presents a monthly investment plan, according to the age of the investor, with the purpose of getting to one million Euros by the age of 65. (In the example below there is no primary investment sum, and the assumed annual profit/revenue is 10%).
|Current age||How much I need to invest each month to reach one million EUR|
The left column indicates the age at which you start investing, the right column indicates how much money you need to set aside every month and invest in the Capital Market so that by the age of 65 you’ll have saved up one million for yourself. (One million can be in Euro/ Pound/Dollar or any other currency, the calculations are the same regardless of the currency.)
Please note: This data is only relevant and true, assuming you are able to produce an average yield of 10% income per year- if over a period of time your average yield is lowered less than that, you won’t be successful in reaching one million. If you manage to reach a higher yield than 10% per year, you will surpass one million. (Of course, it is possible- the answer to how exactly to do this appears at the end of the article.)
What your investment advisor doesn’t want you to know.
Before you run to the bank looking for an investment, there are two important things you need to pay attention to: The first being; as you can clearly see in the chart above, the younger you start setting money aside, the less you need to invest, so no matter how old you are today, if you have children, you know what you need to do, to secure their future.
The second important fact to pay attention to is; you’re probably telling yourselves: “This looks good on paper, but how the hell do I make 10% profit on average per year, when in fact, my current portfolio produces a pitiful return, barely anything worth mentioning?”
This is a great question, the answer is so simple it’s almost disturbing: every Stock Exchange in the world has an index which includes all the biggest, most authentic and stable companies in that specific country.
In the USA for example, The Dow Jones Industrial Average is considered the most prestigious index in the world. With an existence of over 100 years, it actually represents the 30 largest companies that trade in the American stock market (and the world’s as well).
When you invest in the central index, you’re actually investing a little bit in each company that’s included in the index. For example, if you invest in the Dow Jones index, you’re actually getting a small portion of Apple, Boeing, Microsoft, Disney, Coca Cola, Nike, Visa etc.
So as not to bore you, we won’t dig too deep into it, but as a general idea, when you hear or read financial programs saying “What did the stock exchange do today” they are talking about the central index.
Ok, even when understanding all of this, how does this help us acquire a 10% annual revenue?
If we go back to our good friend- the statistics, we see a perceptive fact that most people ignore (including your investment advisor who may or may not be aware of this), the simple fact is that even through the many global crises along the way, and there were many. Large losses of over 50% throughout the years 1987/2008-2009/2000-2002, including the substantial losses felt throughout World War Two and after, Dow Jones produced an average yield of 10% per year.
According to this information, all you need to do, is look at the above chart, set aside the monthly sum according to your age, invest it in the central index using an ETF (Exchange-traded fund) and enjoy your profits!
Seeing as how the chart above solely presents the monthly amount needed to invest (In accordance to age), we recommend using the compound calculator to check more precisely and more accurately different ways to see how different initial investment sums will affect the beginning process, your choice of how much you’d like to increase montly and the results when the yield is either higher or lower than 10% annually.
For your convenience below, the scientific formula:
(Initial deposit * time left until pension) + (Consistent monthly deposits * time left until pension)
+ Patience (not touching funds or profits)=
So where’s the problem?
The problem is human nature, most people can’t wait patiently, not touch money and let it do it’s job. Most of them also can’t handle the movements that define an investment in the Stock Market, especially not during the Capital Market’s crises times (and again, although there were these sort of times in the past, the yield achieved remained 10%). Many also think that the Capital Market is the place to get “rich overnight”, and so they invest in different “dream” companies, whose most recycled word is “speculation”. If we want to be more direct, a bit less gentle we can just be honest. We’re talking about gambling companies, nothing dreamy about them, and just as we mentioned earlier, for whoever likes to gamble- this formula isn’t relevant to him.
What if I want more than 10% a year?
The index, by definition, represents “average”. This means that you can also be above average, but to do that, you would need to invest more time at the beginning of your journey to learning about the Capital Market and the way in which you would need to buy and sell financial assets. In addition, you can devote time to managing your investments daily or weekly.The most important thing you need, is mental strength and high self-discipline, which definitely doesn’t suit every personality type.
After you reading the article, press the Compound Interest Calculator at the bottom of the page, to simulate your potential future financial change, based on your personal data.
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