# No Fail Investing

**YOU: I want to Retire With $1 Million. How Do I Do It?**

**ME: Can you invest $86? **

**YOU:** **Yes.**

**ME:** **Then you need to invest that $86 every month,** for most of your working career (40 years) and you will have over $1 million at retirement.

**YOU: What is the plan if I retire in less than 40 years?**

**ME: Then you have to invest more each month. Here are the amounts to invest to have $1 million based on 40 or 30 or 20 years of contributions. **

**$86/month for 40 years****OR $290/month for 30 years****OR $1,005/month for 20 years**

**YOU: One million might not be enough.**

**ME: Would $3 million be enough? To retire with about $3.1 million you need to invest: **

**$270/month for 40 years,****OR $900/month for 30 years,****OR $3,100/month for 20 years.**

**ME: See the point? Clearly, the earlier you start the better! The best time to start investing is 10 years ago. The second best time is TODAY! **

**YOU: OK, where do I invest the money?**

**ME: Invest the money in one of the S&P 500 Index funds** that I mentioned in last weeks Newsletter (**FXAIX** from Fidelity, **SWPPX** from Schwab, or **VFIAX** from Vanguard). Set it up as an automatic payroll deduction and arrange for the interest you earn to be automatically reinvested. The results above are based on the assumption the stock market over the next 40 years will provide the same return it has for the last 40 years, IE an average annual return of 11.88%

**YOU: $86/month is not very much. **A million dollars seems like a lot of money at retirement for such a small investment!?

**ME:** That is the power of Compound Interest. **Compound interest means that you reinvest the interest on your investment. Soon you are making interest on interest. **

**ME: At first Einstein's statement might seem like a bit of an exaggeration** but the math behind it shows that it is not. For example, if you retire with $1 million, you would have only invested $41,366.00. Compound interest would supply the other $965,197.66. In this example, **compound interest pays you over $23 for $1 you invest.**

**YOU: I always thought the stock market was risky.** Aren't banks safer?

**ME:** **Yes, banks are safer but they pay such a low interest, your savings never amount to very much.** For example, if you invest the $86/month in a bank savings account, after 40 years you will only have $71,160.60. That just is not enough to retire on.

**YOU: **I definitely need more than $71 thousand to retire. I just don't like to take risks.

**ME:** **Then an Index Fund is for you,** because Index Funds are like mutual funds. They include stock from hundreds of companies. Even if 1 or 2 companies go broke, most of the companies will increase in value over the years, which is why the Index Fund increases in value. Your safety is based on the Index fund being diversified across all these different companies.

**YOU:** **How much would I need to invest in a bank to make $1 million?**

**ME: Unfortunately it would require you to invest $1,220 every month for 40 years. **Invest the same amount in an S&P 500 Index Fund and you would end up with more than $14 million. A savings account in a bank is just not going to work for you.

**YOU:** **What if I just made a single large lump sum investment and waited 40 years?**

**ME:** **A single investment of $9,000 if invested in an S&P 500 Index Fund would increase to $1 million in 40 years** based on the historical performance of the stock market. **If your initial payment is big enough, you can eliminate the need for monthly payments.**

**Take Home Points**

**You can be successful on any income.**Standard financial advice has always been to save 10% of your income for your retirement. However if you only make minimum wage, $86 is only 3% of your income. So really anybody should be able to save enough for retirement,**BUT YOU MUST START EARLY!!!!****Successful investing can be as simple**as buying an S&P 500 Index fund, as advocated by Warren Buffet the worlds most successful investor.**FXAIX from Fidelity, SWPPX from Schwab, or VFIAX from Vanguard are 3 examples.****REPEAT: You must start early. This is where people go wrong. Everybody CAN save enough for retirement, the problem is they don't start soon enough. You can't wait until 5 years before retirement to start saving.****But if you do start late, you make up for it by investing a larger amount.**

**I hope you enjoyed this weeks NewsLetter and Happy Investing!**

**Take care and BE HEALTHY!**

**CW Jasper**

**December 2022**

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