While looking at Moolanomy’s blog the other day, I stumbled on an intriguing post that illustrates why it’s hard to break that P1-million net worth mark.
It’s not just the persistence and focus needed to make your first million. Moolanomy correctly points out that it’s also mathematically challenging.
“If a person invests $15,000 per year starting at age 25 and the investment gains on average 10% a year, he can get to $1 million mark by 45. The first million took 20 years! But if you keep going down the table, it only takes…
6 more years to get to $2 million at 51
4 more years to get to $3 million at 55
3 more years to get to $4 million at 58
2 more years to get to $5 million at 60
2 more years to get to $6 million at 62
2 more years to get to $7 million at 64
1 more years to get to $8 million at 65
This confirms what one of the readers of this blog said in a comment on my post on The Science and Art of Making Your First Million. He said:
“Making your first million is the hardest because you’re starting from scratch. The next million is less hard. The succeeding millions are easier because you have a bigger base. Money begets money.
I made my first million at 25 in real estate during the real estate boom in early ’90s. I had to bet all my savings and borrow money to do that. Now I earn the same amount in interest alone.
Business is the fastest way to make money. It is also the fastest way to lose money if you fail. Don’t worry it’s okay to fail but don’t lose it all.”
Inspiring, right? As I was looking through MoneySmarts’ archives, I realize Pinoy Investor is only in his thirties. Unfortunately, he doesn’t want to be interviewed 
For average Filipinos, making the first million by 25 may not be as easy though. But what if we make some simple assumptions. Say, regular savings of P2,000 a month starting at age 20 when most of us start working? The table looks like this:
It will take 16 years to make your first million!
But it gets easier after that…
6 more years to make the second million
4 more years to make the third million
3 more years to make the fourth
2 more years to make the fifth
2 more years to make the sixth
1 more year to make the seventh
…then you’ll be making one million a year after the eighth.
Consider that this illustration is only for a P2,000 savings per month on a 10% return per annum. Come on guys, we all can do better than that!
November 24th, 2007 at 11:06 am
just wanna share from an average wage earner. we had this paluwagan in the office. the system is that we pay the designated treasurer the corresponding share (worth 100 per share) every pay day. after the calendar year, all earnings from the interest on loans to members and non-members and penalties for late payment on share shall be distributed to the members. this year we earned at least 14%. though lower than 2 previous years at 17% i cant earn it if i put my money elsewhere. did i mention it has no withholding taxes! im looking forward for my 1st million in a few years time!
November 22nd, 2007 at 1:38 am
@Honey Bunny — from my own experience, but that doesn’t say much.
If you think about “average investors” who have limited experience picking individual stocks, and don’t have the kind of resources that professionals do, what do you think is the odd of them beating the market average?
That said, I believe some people can pick individual stocks and outperform the market on average. I am not in that league yet, and I think that most “average investors” are not either.
Again, I do emphasize “average”.
November 21st, 2007 at 7:20 pm
sa hirap ng buhay mkakapagtabi pb ang isang pinoy ng P2,000?maari sa mga mayayaman…wlang aangat n mahirap dhil s kurakot n pamahalaan…mayayaman lang ang umuunlad at nkakaipon….:)):)):))…
November 21st, 2007 at 1:21 pm
Pinyo: “For average investors, picking stocks is a game of chance at best.”
^ what made you take this position? articles from mutual fund pr groups? john bogle?
November 21st, 2007 at 5:29 am
@Salve - I’d prefer to built my own overall portfolio from a variety of index funds and ETFs, focusing mostly on index. By investing everything in one Globally Diversified Fund, I am banking on that one manager doing the right thing for me — I don’t think this is possible.
As far as inflation, it will affects us no matter what. We just have to learn to deal with it.
@Chris - You can bet on a few stocks too, and if you’re lucky you’ll end up with Microsoft, Google, or Staples. On the other hand, you may ended up with Enron, Worldcomm, and ETrade. For average investors, picking stocks is a game of chance at best.