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Is it reasonable to expect that an novice investor like me could turn $5600.00 into $45000.00 within the next 27 years?

Jul 20, 2012 by Matthew from Norwalk, CA in  |  Flag
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Dushyant Pandit Level 17

I realize you asked this question a while ago – but I was curious if you did make the start? As mentioned, the financial mathematics of turning $5,600 into $45,000 in 27 years implies an 8% annual return. This is not an unrealistic number looking at about 100 years of financial history.

BUT, If you have not started investing, the bigger question to ask is why not? Let’s assume that things do not go your way and you get a lower return each year than 8%. I still believe you will be better off having some nest egg than none at all.

My learning from a life in investment management is that it’s a lot like going to the gym: Start early in life, start small and keep going. This may not assure a longer life or even a healthy one – but it’s a lot better than the alternative.

Comment   |  Flag   |  Jun 07, 2013 from Summit, NJ

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Matthew - your question implies an annual compounded rate of return of slightly more than 8%. Such a return is not unreasonable provided you implement a disciplined strategy using low cost index funds and avoid the temptation to panic. Obviously, this outcome cannot be guaranteed and you will likely experience significant volatility, including significant loss periods, along the way. Good luck!

Comment   |  Flag   |  Jul 20, 2012 from Morristown, NJ

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Herbert N Glass Level 18


I think that it is possible. $45,000 is about 8 times $5,600. That means that if you can double your original investment 3 times over the next 27 years at a rate of doubling your original investment in 9 years, and then doubling the amount that you have after the first 9 years over the next nine years again, and then after the last 9 years again, you would have your $45,000 in 27 years. Based on the "rule of 72" you can double your investment every 9 years by earning 8% per year each year. To meet your goal, you would have to earn that 8% per year for 27 years.

However, given that you are a novice, and we do not have a crystal ball to see into the future regarding what investment performance for you or anyone else will be likely to enjoy, I am afraid that it is impossible to predict how you will do.

My advice to you is to hire an investment advisor to guide you with your investment choices. All studies have indicated that the average returns of an advisor are greater that a non professional such as yourself. I think you will then have a greater chance of reaching your objective of having $45,000 in 27 years.

Herbie Glass, Glass Retirement Strategies, Inc.

Comment   |  Flag   |  Jul 20, 2012 from Franklin, MI

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Very good question. The key point is if you don't start investing in your future and using the financial markets to out perform inflation and bank rates, you wont be able to maintain your current lifestyle in your retirement years. the compounded rate of return of approximately 8% is not unreasonable but it needs proper global diversification based on your risk tolerance. The next question is what is your risk appetite or tolerance for volatility I the market?

No easy answers here. But if you maintain a long-term objective and use dollar cost averaging, proper asset allocations, I can assure you that you should be better off then doing nothing and not planning for your future retirement. Take care and keep asking good questions and acting on future goals.

Comment   |  Flag   |  May 26, 2013 from Milwaukee, WI

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If we believe in the Capital Asset Pricing Model, which measures excess return over the risk free rate, then odds are not likely. If the risk free rate is assumed to be treasuries (risk free is questionable), then you would need to assume an excess return over treasuries of nearly 6% per year for 27 years. This is not likely at all. Of course, we could assume that treasury yields will skyrocket over the next 27 years. This would tend to force other markets with more risk (kinda funny concept there) to return even higher.... or so the theory holds. None of this is predictable enough for you to think you can return over 8% on your own as a novice. Sorry to be the bearer of bad news on that one.

Comment   |  Flag   |  Jul 20, 2012 from Austin, TX

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Anything is possible... but, there are no guarantees.

While I don't condone the use of "past performance" as a sole indicator, if you look at the "25 year average" return of the S&P 500, there have only been two instances where the 25 year average has been less than 8%. Of course, you also need to understand your own tolerance for risk, as well as consider the effect of fees or commissions.

I'd strongly advise you engage the services of a qualified professional to help you determine your tolerance for risk, and the best way to accomplish your goals.

Good Luck,


Comment   |  Flag   |  Apr 19, 2013 from Springfield, MO

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