Will you have a sense of fullfillment and security when you have atleast a million dollars in bank when you are old and cannot work anymore. Almost anyone can retire as a millionaire, all you need is little over $3 a day. We will explore some techniques to make money work for you and make you a millionaire while you retire.
Dollar-Cost Averaging
Dollar-cost Averaging (or Regular Savings Plan) is a simple strategy of investing small amount of money every month. Investing atleast $100 every month in some investment like mutual funds or stocks that has an average annual return of 8% to 10%. Make this as an extra savings after your social security or provident fund savings.
Compounding
Einstein wondered Compounding as the eighth wonder. What made a mathematical genius wonder at this simple principle? Let us now see the power of compounding.
Let us say you are using Dollar cost average method to invest regularly. And you are investing $100 a month in stocks or mutual funds with a annual return of 10%. At the end of first year you will have $1320. At the end of 10 years you will have $21,037. Not a big sum, but still avoid the temptation to withdraw for that vacation. By the end of 30 years you will have some $217,132. After this at the end of 40 years you will have $ 584,222.
Now the magic happens, at the end of 46 years guess how much you will have, it will be million dollars ($1,045,170). If you notice that it took 10 years to accumulate $20,484, but it only took last six years to generate $460,948 or double from $ 584,222 to $1,045,170.
For compounding to work its magic
1. You must put aside some money lump sum or regularly in an interest generating account
2. Must not withdraw from the account
3. Allow sufficient time to compound
What you have done here is to simply invested $100 a month, which is like little more than $3 a day and retire as a millionaire. If you have started investing at the age of 20, by the age of 66 when you retire you will be a Millionaire.
Author: Jag Karnan
http://www.whyyouarenotrich.com/
