Simple investment question.

[LoneWonderer]

So let's say that I decide to make an initial investment of 500€ into the S&P500 which has had a historical anual return rate of about 6-10% and every month I add another 500€ of savings to this index fund. After 40 years my compound intrest would make me close to 1 million dollars. I asked chatgpt and this is the answer it gave me:

If you start off by investing 500€ and invest another 500€ monthly for 40 years at a 6% compound interest, you will have 1,006,202.82€ in 40 years.

Is my math correct? Could it really be that easy? What am I missing. Would you recommend this if it was the only investment I made?

Thank you.

[manuel bon]

I am new to investments, so I can't give you the best advice on this topic. 

I am investing every month 10% from my payslip (not much rn, don't have a stable job) in the S&P 500, and I have invested also some euros in a farmaceutical company that uses psychedelics for treatments (it's a new one, and for now it's not going well, but from my unprofessional pov I expect it to grow).

For the S&P I believe that in this times it's not guaranteed that you will always get a 6-10% return, as you can see in the last years it's been going up and down, with not much return. It will probably not go to zero (and even if it did, at that point money would not have value anymore), but it could also stay like this, or go down. 

[Nilsi]

4 hours ago, LoneWonderer said:

So let's say that I decide to make an initial investment of 500€ into the S&P500 which has had a historical anual return rate of about 6-10% and every month I add another 500€ of savings to this index fund. After 40 years my compound intrest would make me close to 1 million dollars. I asked chatgpt and this is the answer it gave me:

If you start off by investing 500€ and invest another 500€ monthly for 40 years at a 6% compound interest, you will have 1,006,202.82€ in 40 years.

Is my math correct? Could it really be that easy? What am I missing. Would you recommend this if it was the only investment I made?

Thank you.

What do you mean „is it that easy?“

You take 40! years to make a million dollars, which will barely be enough to finance your retirement, if you live very modestly.

Figure out how to make a mill in 4 years. That’s when economic laws start to become fun.

[LoneWonderer]

@NilsiDo you think it still better than a traditional savings account? I'm trying a very risk free way to make money. I feel It's still better than a traditional savings account where you get 1% if you're lucky. 

48 minutes ago, Nilsi said:

What do you mean „is it that easy?“

You take 40! years to make a million dollars, which will barely be enough to finance your retirement, if you live very modestly.

Figure out how to make a mill in 4 years. That’s when economic laws start to become fun.

If on top of the investing you are paying 10% into a savings account the 1 million is just a bonus to a retirement fund you also paid into for 40 years. Let's be realistic though, most people including me don't have the financial knowledge to make a million in 4 years and quite frankly it is extremely rare even for very experienced investors with many years of experience to do what you describe. I and most people will not take that kind of risk with our money.

Edited August 27, 2023 by LoneWonderer

[Nilsi]

16 minutes ago, LoneWonderer said:

@NilsiDo you think it still better than a traditional savings account? I'm trying a very risk free way to make money. I feel It's still better than a traditional savings account where you get 1% if you're lucky. 

If on top of the investing you are paying 10% into a savings account the 1 million is just a bonus to a retirement fund you also paid into for 40 years. Let's be realistic though, most people including me don't have the financial knowledge to make a million in 4 years and quite frankly it is extremely rare even for very experienced investors with many years of experience to do what you describe. I and most people will not take that kind of risk with our money.

I would rather use my spare money to invest in education/professional development, nutrition & supplementation, networking, etc. — this is how you create real income.

I don’t know your situation, but planning 40 years ahead is kinda ridiculous to me. I‘m concerned with how I can make as much money this month, this year and the next couple years — that’s about as far as it goes.

You could figure out how to make a million in 4 years, if you were actually serious about it.

Once you’re rich enough to not know what to do with your money, you can start worrying about investing.

This is just my way of doing things (and how most of the wealthy people I know roll). If you’re very neurotic, conservative and don’t have high ambitions, what you’re suggesting is probably the right move for you.

Edited August 27, 2023 by Nilsi

[flowboy]

On 27/08/2023 at 1:53 PM, LoneWonderer said:

Is my math correct? Could it really be that easy? What am I missing. Would you recommend this if it was the only investment I made?

What you're missing is that 1,000,000 in 40 years will only be worth what 295,712 is worth now, if inflation holds steady at an average 3% a year, and it is certainly not going anywhere.

Also: how old will you be in 40 years?

Do you ever look at a 70 year old and think: "I wish I had his body and energy levels and 300K instead of being where I am now"?

If your plan is to always have a job and never start a business, then you better get a bit more ambitious and climb the ladder until you can save 1000/m+

If you do see yourself starting your own business at some point, then this plan does not make any sense, because any extra 500 bucks you have left is better spent on advertising and blowing up your income than stowed away for a measly 6%.

Edited August 29, 2023 by flowboy