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| Photo credit: https://pixabay.com |
I know you understand the magic of Peso Cost Averaging.
Today, I’d like to share with you the Magic of One Percent.
If you don’t know about it, then a fair warning: It will astound you.
Here it is…
Let’s say Bert is 30 years old and recently started investing P5000 a month in the
stock market.
He did so until he reached the age of 60.
If it grew his investments by 12 percent each year, Bert will
have an amazing P16.2 million in the stock market.
But because Bert isn’t just doing Peso Cost Averaging, his money doesn’t
grow by 12 percent but by 13 percent a year. Do you know what that one percent difference will do?
Answer: Instead of P16.2 million, Bert will have P19.8 million.
The difference of P3.6 million came from the Magic of One Percent.
Let me make this more graphic. If Bert retires at age 60 with P16.2 million, and decides to live on the interest of
his money, withdrawing four percent, that will be P648,000 living expenses for his first year.
But if Bert retires with
P19.8 million and withdraws four percent, that will be P792,000.
That’s 22 percent extra for his expenses and charity
work as a happy retiree.
Can I challenge you?
Bert’s example is flawed.
In other words, I want you to beat his numbers and earn much more than Bert.
First, as your income increase, you should invest more.
In my example, Bert invested P5000 from age 30 to age
60. You shouldn’t do that.
Because as years go by, your income is expected to increase. So you should invest more too.
If you do this, your money will grow exponentially too.
If you do this, you’ll more likely end up with P25 million to
P30 million when you retire.
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