How to be a Millionaire through Investing

Many individuals aspire to become millionaires, but only a few people know what they should be doing to achieve that dream. Even though there is no trick or magic involved in becoming a millionaire, we cannot over-emphasize the place of consistent, disciplined, and strategic investing. 

This investing involves buying stocks and shares, mutual funds, ETFs (Exchange-traded funds), ETCs, bonds, Jutes, etc.

If you are ready to begin your journey to becoming a millionaire, here are four key factors that will determine how quickly you will become a millionaire as you invest in paper stocks;

1. The lump-sum you start with

You will need to have a lump sum to begin this millionaire journey. This lump sum will benefit from compounding. It will grow as the years go by. The millionaire journey is not one you should start with £200. 

That money you have been thinking of using to buy a brand new car, throw a big party, or go on a big holiday; pause right there! You do not need to buy a brand new car, and you do not have to throw the biggest party in town. 

Throw that money into your investment account and begin your journey to being a millionaire. The bigger your lump sum is, the better. The more you can afford to start with any amount between £10,000 and £50,000, the faster you will become a millionaire.

You can begin with £5,000 and still be a millionaire, but a lump sum will enable you to get there quicker.

2. The amount you invest monthly

In addition to the lump sum you are starting with, you would need to put in a certain amount monthly, which will require a certain level of consistency and dedication.

3. Rate of return

The percentage return you are getting on your investment is an important factor. The kind of investment you buy determines or influences your rate of return, and the amount of risk you are willing to take will determine how much you can get back. 

Some investments have very low risk and automatically have a low rate of return. If you invest in bonds, for instance, it is very safe because you are loaning money to a large corporate body or government; your rate of investment will be low, but if you go for exchange-traded funds, your rate of return gets higher. 

However, if you put your money into mutual funds, you get a higher return than bonds and ETFs, but if you put all your money into specific shares, you get more in terms of the rate of return.

When you invest in shares, your risk is higher than if you invest in mutual funds and exchange-traded funds. This is because mutual funds and exchange-traded funds spread your investment across a wide range of companies, while shares may mean putting your eggs in a particular basket. 

The average rate of return on the stock market is 7%, but sometimes, you can get as much as 15 to 20% return on the stock market.

4. Duration of investment

The duration of investment signifies how much time your investment stays invested. If you invest for just two years and pull out your funds, you will not become a millionaire that way. If you invest for only a year, you would likely lose more than gain. 

How long you invest is crucial to how soon you become a millionaire because of the beautiful, magical thing called compounding.

When you put these four factors into a pot alongside compound interest, you are on the right track to becoming a millionaire.

If you start with a lump sum of £20,000 and a monthly contribution of £1000 every month, with an interest rate of 10%, you will be a millionaire in twenty years; this means if you are below 40 years old and you start now, you will be a millionaire before the age of 60.

If a 40-year-old decides to go for a high-risk investment with about a 15% interest rate, manages the market, and stays with it long enough, he will become a millionaire before age 60. If you begin at a younger age of 25, you are on track to retiring earlier.

Investing is like planting a seed; you do not go back tomorrow to dig it up to see how it is doing. You leave it there and give it time to grow. If you have bought strong growing, dividend-paying company stocks, stick with it. Put it aside and wait till you become a millionaire. 

If you follow these four rules of investing, there is nothing much left for you to do than sit back and watch your wealth grow.

I hope you have enjoyed reading.

Till next time.

Love

Ronke O.