May 2, 2021
Investing in the S&P500: 3 scenarios
Investing 500 Euros per month can make you a millionaire.
This may be a surprise to some readers, but looking at the S&P 500’s average return of 9.8% since its enactment, it is certainly possible.
The financial space one can afford to invest differs per person. This may also vary in time due to personal circumstances, but your personal financial budget is what’s important. You do not have to invest large sums of money to enjoy a good return. However, I recommend you start investing as early in your life as possible to maximize your returns. Even if you start investing later in your life, you can still enjoy the fruits of compound investing.
In this article, I present you the power of compound investing via three alternative scenarios for investing diligently for different time periods.
Student (EUR 100)
While studying, it’s most likely that you aren’t earning your maximum attainable income. However, many students manage a part-time job to earn some money next to attending classes and study sessions. Others may also face relatively high living costs and therefore cannot afford to invest a great deal. If you’re able to save and set aside at least 100 Euros a month, you may want to consider investing this amount. Looking at the following examples, the power of compound investing shows its potential.
10 Years
Starting with an amount of 100 Euros and adding the same amount every month, against a 9.8% growth rate, will result in 21.053 Euros after 10 years.
30 Years
If you manage to diligently invest 100 Euros every month for 30 years, you are not only ambitiously sticking to the plan, but you will also be rewarded well for your relatively small investments as this adds up to a total sum of 210.347 Euros. The power of compound investing starts to show its colours.
Working (EUR 500)
As you’re working full time, you may be thinking about your financial future and you may have more financial space to invest. Being able to devote 500 Euros per month to investing can lead to the following amounts after 10 and 30 years.
10 Years
Supplying your investment account with 500 Euros every month, against a 9.8% growth rate, will result in 105.267 Euros after 10 years.
30 Years
Diligently investing 500 Euros per month and making use of compound investing for 30 years straight, can make you a millionaire. As this leads to a total sum of 1.051.739 Euros, compound investing is worth reading into.
High income (EUR 1000)
Some of us are lucky enough to be able to invest 1000 Euros per month. And if you can invest this amount every single month against the average rate of 9.8% of the S&P500, this would lead to the following sums.
10 Years
You can already taste the power of compound investing and discover this by investing 1000 Euros per month for 10 years, which can lead to 210.535 Euros
30 Years
After thirty years of investing, you could have attained a wealth of 2.103.478 Euros, which is a wealth level many of us dream of.
Conclusion
My message to you is that you are in control of your financial position in your future. The 10-year term examples give you an idea of the power of compound investing and the results investing can bring you in a relatively short term.
The real power of compound investing is showing itself for longer periods of time, taking the 30-year terms. Investing needs to be done sensibly with the right knowledge of the existing securities, methods to pick the right investments, and risk spreading. As many of us will be working for more than 30 years, it could be your own omission preventing you to become a millionaire.
