$ 100 per month

How to invest $ 100 per month and accumulate a serious amount?

Many parents dream of securing the future of their children – buying them an apartment or paying for a good education. But where to get the money?

Financial consultant, founder of the consulting group “Personal Capital” Vladimir Savenok showed from his own experience how to create a “reserve fund” for a child, investing only $ 100 per month for 17 years.

“In 2003, I decided to create capital for my then three-year-old daughter Alicia. At first, these were theoretical calculations: is it possible to accumulate a large amount if you save $ 100 for many years. It became interesting for me to test this in practice. I made the decision to invest $ 1200 per year, based on the calculation of $ 100 per month. This amountseemed to me affordable.

I decided to invest money once a year, at the beginning of January. The monthly investment would cost me more – because of the fees. But now I can say that for a period of more than 10 years, the difference in profitability between monthly and annual investment is minimal. Success depends on a clear plan, discipline and – a little – luck: you can buy stocks at the very bottom and make good money on them, but it is impossible to foresee and guess such an outcome.

For the experiment, I chose the most popular and reliable currency – the dollar, and the most liquid and developed market – the American one. I don`t considermarkets that are heavily influenced by politics as investment markets.

A good strategy is to invest in global markets. Yesterday, the United States grew best of all, tomorrow Europe or China may start to grow, you can never predict. In 2003, there were much fewer conditions for investing in foreign funds. In the late 1990s, I had an account with the American broker Datek, which later merged with TD Ameritrade. The first time I bought stocks through this broker with relatively low commissions. Then I switched to a European broker. I would choose the global stock market. There is, for example, the Vanguard Total World Stock fund, which includes 50% of US stocks, the rest is made up of stocks of companies scattered around the world.

Another strategy – for more cautious people – is to add a global bond fund to stocks, such as the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV). But I wouldn`t advise for such experiments to complicate the portfolio, diversify it too much. One or two funds is the maximum.

A year ago I transferred my money to the S&P 500 again. This time I chose the Irish fund ISHares. AllAmerican funds pay dividends, and European funds (inthis case ISHares) can reinvest. This option is moreconvenient for me.

As an investor, I remember 2000 – then there was a bigfall and stagnation of the economy in the United States, the market didn`t grow for three years. Therefore, I came to the 2008 crisis, taught by experience. But even for me this crisis turned out to be very unpleasant.

For six years, I invested about $ 7200 in theexperiment, and at the end of 2008, the account had a smaller amount – $ 6900. It was a shame to get a “minus” for such an investment period. But at the same time, I was driven by interest. I had no doubt that it was necessary to continue despite any losses. Crises are coming to an end – and this can be seen on the graph. The pit of 2008 quickly disappeared without atrace.

No need to try to guess the behavior of the market. It can grow for another 10 years. Or fall for 5 years. It is worth developing a clear strategy and following it no matter what.

I do not panic even now, when everyone is talking about the market fall due to the coronavirus. I see that these are emotions, but there are no fundamental, serious reasons for the crisis yet.

I believe that parents are obliged to provide their children with a good education and help with their endeavors: buy an apartment or give start-up capital for a business. But there is a big difference between parenting help and buying nonsense: cars, gadgets, etc.

My experiment is a good way to teach children how to manage money. They see that with such simple, small amounts, with a reasonable approach, they can accumulate capital.

The main thing is to start. And it is desirable to do this as soon as the child is born.

You can automate the process – invest in savings programs of insurance companies. They work like this: you specify the amount, fund (for example, S&P 500) and the frequency of debiting money (once a month, quarter or year – whatever you want). This money will be automatically debited from your card and transferred to the investment. I recommend specifying the amount that is as comfortable as possible for you.If a client misses contributions, then after a decade of the program, he will not receive a bonus. And if he decides to terminate the program, he is subject to high fines. This is how all insurance companies work, so these programs require strict discipline.

The materials of the article are used, translated from the article of the site https://lkapital.ru/ – million for daughter.

Always yours, Jack!

For any questions, write to the email:  info@paydayloanpay.com

Leave a Reply

Your email address will not be published.