"You have to have a small amount of money and invest it regularly for a long time." - Ron Baron (Trades, Portfolio)
"It is all about compounding." - Ron Baron (Trades, Portfolio)
I am all but set-up for 2018 and beyond. I made a $2,500 deposit at E*Trade. I just need the funds to clear before the new year, which should be no problem. After that, it becomes a game of saving, investing and compounding. A lot of patience and discipline too as this project is meant for the long haul (20 or more years).
So what's up with the cheesy title?
I saw this two-minute clip on CNBC and it struck a chord with me. At only two minutes in length, it's far from being the longest video. It's also not a Warren Buffett (Trades, Portfolio) video, although I could search for something similar. It's a short clip between Ron Baron (Trades, Portfolio) (huge fund manager) and Becky Quick. The title of it is, "Anybody can turn $5000 a year into nearly $1 million."
Ron Baron: Anybody can turn $5,000 a year into nearly $1 million from CNBC.
The video struck a chord because this is the exact method in which I hope to build wealth with only $2,500 to begin with in 2018 and beyond. The only difference is I will be using the Buffett Indicator to invest more when the markets are undervalued (as measured by the Buffett Indicator).
How to become a millionaire
So how do you become a millionaire?
Save and invest regularly. Let compounding work its magic.
It is not going to happen overnight. I will begin in 2018 and hope to invest in a low fee index fund. But before we move onto investing, let's talk about saving. Before anything you must have your finances in order ,and that means earning and keeping more than what you owe. Everyone's financial situation is different, but if you are able to keep your debts at a minimum and keep a good portion of your income, you are golden. Remember, you want to save and invest regularly. I will be saving weekly and investing quarterly.
How much should you save? Any amount at which you "don't feel it." I chose $75. After going over my finances and plans, I have decided that for the future, $75 per week will not make a difference in my life. This number will be different for everyone. Some can afford to save $200 a week. Others will only be able to save $25, and that's fine. The key is to start. As time goes on, you will see your weekly deposits and account begin to snowball. Ideally, you are able to automate these weekly deposits between your bank and broker and eliminate any human interference.
Now to the investing side of things. I would love to say this is where it gets exciting, but unfortunately that is not the case. This project is flat out boring and takes too long. On top of that, you don't really do anything.
"Consistently buy an S&P 500 low-cost index fund." -Â Warren Buffett (Trades, Portfolio), CNBC March 2017
Simple advice from the greatest investor of all time. Do most investors follow it? No. Should you follow most investors? No. As a matter of fact, I'm going to follow Warren Buffett (Trades, Portfolio)'s advice. Beginning on Jan. 1, and each quarter after that, I will be purchasing a low-cost index fund that tracks the S&P 500. And I will be doing so on a consistent basis. The one thing that might differ is, I will be purchasing more shares when the market is undervalued as measured by the Buffett Indicator. In the same interview he follows it with "keep buying it through thick and thin, and especially through thin." Thin equals when the market is undervalued. That moment where you want to be greedy when others are fearful.
"My wealth has come from a combination of living in America, some lucky genes and compound interest." – Warren Buffett (Trades, Portfolio)
Compound interest. Two words that will have the most impact on this project. In Einstein's words, compounding is the eighth wonder of the world. It is truly an amazing thing watch, but you have to have the patience to stick around when it begins to gain momentum. Unfortunately, the majority of individuals who follow this project will not stick through with it long enough. It's too easy. It's too simple. It's not fun and it takes too long.
Will the project make me a millionaire?
I don't know. Even if I fall a bit short, I will be OK.
