How to Make a Million Dollars investing in Mutual Funds

Someone once said the key to making money in the stock market is to buy low and sell high. Most people who own stocks (I hesitate to use the term "Investors") do just the opposite. The current down market provides a good example as most of those now selling in panic were anxious buyers when the market was at its peak.

Read on to find out how to build a millions dollar nest egg by investing in mutual funds.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Time
• Discipline
• Money to invest

1. Do the math.
   
   Learn the "Rule of 72" to determine how long it will take to for your money to double at a given interest rate.
   
   72 divided by the interest rate = years to double.
   
   For example: at an interest rate of 10% your money will double in about 7 years (72/10=7.2)

2. If you're just starting your first job you might not have a lot of money but you do have the advantage of a long time for your investment to grow. Let's say starting at age 20 you invested $50 per week. At a rate of return of 10% you'd have accumulated over $32,000 by the age of 30. Now you decide to stop adding to your investment account. Here's what will happen:

3. Using the rule of 72 and assuming a rate of return of 10%, your money will double ever 7 years, so, in 7 years, when you're 37 your money will double to $64,000.
   
   In 7 more years you'll be 44 and have $128,000.
   In 7 more years you'll be 51 and have $256,000.
   In 7 more years you'll be 58 and have $512,000.
   In 7 more years you'll be 65 and have $1,024,000

4. So, if you start early enough, you can get to one million dollars by investing only $50 a week for ten years.

Tips & Warnings

• Put your investments on auto-pilot to maximize your chance for success.
• Read my article on Couch Potato Investments for ideas on starting an investment account.
• To make the math easier I've assumed a rate of return of 10%. This is about the annualized, long term rate of return for the stock market. This does NOT mean that by investing in the stock market or any specific mutual fund you are guaranteed an annual return of 10%.
• Re-read the above warning.

Resources

• Author's Page
• An easy, low maintenance way to wealth

[scotto987]

on 10/21/2009 Hey Jerryfriend - it is easy - it's like riding a run-a-way freight train down hill - hang on dawg!!

[jerryfriend15]

on 10/4/2009 You make it sound so easy!