In today’s era, where everyone wants financial security and till retirement, he thinks that his life should be full of money, but the question is whether we can become a millionaire by investing only $50000.
The answer is yes, if you have invested your money in the right way and for the right time, then you can be sure of an S&P 500 index.
What is S&P 500?
S&P 500 is a stock collection of 500 best and biggest companies of America, which includes best and big companies like Apple, Microsoft, Google, Amazon, Tesla.
This index is seen as the world’s strongest and the stock market that has given stable returns for a long time.
Historical Returns: How much have you earned?
The average annual return of S&P 500 is around 10% but when we talk about long term like 20 to 30 years i.e. if you have invested your money with patience for this long then you will see that a very big amount will grow miraculously.
So let us understand how it works. How to become a millionaire?
Because there are two sides of the same coin, let us see how the amount is multiplied.
Example: Investment Growth at 10% Average Return
| Investment Amount | Time Period | Future Value (at 10% return) |
|---|---|---|
| $50,000 | 20 years | $336,375 (₹2.8 crores) |
| $50,000 | 30 years | $872,470 (₹7.3 crores) |
| $50,000 | 35 years | $1.4 million (₹11.7 crores) |
Note: This calculation is based on the compound interest formula:
Formula:
FV = P × (1 + r)^t
Where:
- FV = Future Value
- P = Initial Investment
- r = Annual Rate of Return (10% or 0.10)
- t = Number of Years
Your biggest weapon in this will be time
The sooner you invest, the bigger the return you will get.
If you leave only 50 thousand dollars for 30 years, then that amount will reach you almost $872,470.
Understand the magic of compounding
- Every year your earnings also earn the next year, the interest on the amount given by you and then the interest on that interest increases very fast as time increases.
- That is why the growth seems slow in the beginning, but as soon as you see it after 20 to 30 years, you get to see many times more in dollars.
How much should you start monthly SIP with
Suppose you cannot invest 50000 at once, but this does not mean that you cannot become a millionaire, if you do SIP every month then only you can become a millionaire, so let’s understand how
- $500 per Monthly SIP
- Investment for 30 years
- 10% annual return
Final amount will be more than $1.1 million
Why SIP 500 is the best option?
Let us understand why SIP is the best option from the topics given below
- Diversification: 500 companies = low risk
- Stable Growth: With strong returns for 100 years
- Passive investing :means you don’t have to pay attention to daily fluctuations
- Low fees: Index fund or EPF are very cheap
Points to note
- This investment should be for a long term, at least 20 to 30 years
- There will be fluctuations in the market but you don’t have to panic
- Keep increasing your SIP a little every year so that your amount can also be recurring
- Keep inflation and tax in mind
Conclusion
If you have invested an initial amount of $5000 in SIP 500 and after 30 years you will get a return of $5000. If you do not have any gap from 12 to 35 years then you can earn a very large amount till retirement which will be enough for you to live a luxurious life throughout your retirement.
This is the best way of smart retirement planning without looking at the stocks every day.
Remember
“Time in the market is more important than timing the market.”