{"id":576792,"date":"2022-04-16T11:00:51","date_gmt":"2022-04-16T09:00:51","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=576792"},"modified":"2022-04-14T10:33:14","modified_gmt":"2022-04-14T08:33:14","slug":"how-long-it-takes-to-turn-r1000-into-a-r10-million-investment","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/576792\/how-long-it-takes-to-turn-r1000-into-a-r10-million-investment\/","title":{"rendered":"How long it takes to turn R1,000 into a R10 million investment"},"content":{"rendered":"

Adriaan Pask, chief investment officer at PSG Wealth says that a financial adviser is like your mountain climbing Sherpa, guiding you along your financial freedom journey. <\/span><\/p>\n

Before you jump into any investment product, it\u2019s essential to understand what risk factors you are comfortable with, as well as the investment period required. <\/span><\/p>\n

Searching for photos of mountain climbers (not the exercise), you\u2019ll more often than not find images of happy, jolly people on the summit, or with the abyss behind them. You rarely see the whole journey, which can make it seem as if reaching the top is only for a select few.<\/p>\n

Just like conquering a mountain, you\u2019ll find that financial freedom is within your reach with a few simple yet disciplined steps.<\/p>\n

Remember to breathe<\/strong><\/p>\n

Calculating your financial freedom goal and seeing all the zeros before the decimal can be incredibly overwhelming. It needn\u2019t be. Take a moment to breathe and break down your plan. Remember, part of the joy you see in the mountain top pictures is the achievement of having bested the journey.<\/p>\n

And unless you win the lotto (the chances of which, according to the South African National Lottery, are about 20 358 520 to 1, so highly unlikely), reaching your goal will be a journey, and not a sprint.<\/p>\n

Do the prep work<\/strong><\/p>\n

Before you jump into any investment product, it\u2019s essential to understand what risk factors you are comfortable with, as well as the investment period required. Unfortunately, if the past few years have reinforced any lesson, it\u2019s this: there is always volatility in markets \u2013 it\u2019s part of their life spans. But you can search for products that minimise the risk factors.<\/p>\n

Our core philosophy when constructing and maintaining investment solutions and portfolios is to find ways to offer optimal returns at the lowest possible risk. One of the tools we use is diversification, which essentially is a measure that creates balance within our products.<\/p>\n

So if one part is negatively impacted by market volatility, other parts will counter the loss and drive gains. Another favourite tool is longevity \u2013 the longer you stay invested, the more compound interest your investment can accumulate and the bigger it can grow. (For more on the concept of sequence of returns.<\/p>\n

What size are your steps?<\/strong><\/p>\n

When putting your plan together, you also need to be realistic about your investment commitment and period. If you can only afford to save R1 000 every month, don\u2019t do your calculations on R2 000 per month. Similarly, if you want to enjoy your financial freedom but can only save R1 000 per month, you need to understand that you won\u2019t reach it in just a few months.<\/p>\n

Let\u2019s look at the table below, where the ultimate goal is to reach R10 million at a set interest rate of 10%. In the first scenario, the investor can only put away R1 000 per month, while in the second scenario, the investor can put away R2 000 per month. In both examples the investors reached the R10 million goal; however, it took the second investor 38 years to do so, while investor one needed about 45 years.<\/p>\n

Yes, pushing yourself where possible is beneficial, but with the right plan in place, you will reach your goal within your means.<\/p>\n

Table 1: Periods to reach a R10 million target<\/strong><\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Brave the obstacles<\/strong><\/p>\n

As mentioned before, there is no such thing as an equity market without volatility. Understandably so, as they are influenced by human factors. Looking at graph 1 below, we get a clear view of the volatility that the FTSE\/JSE All Share Index (ALSI) experienced over the past five years.<\/p>\n

When opening a news or social media site, you are bombarded by market-impacting events \u2013 the current Russian invasion of Ukraine, the surging oil price, pandemics, elections, electricity crises, riots and so much more.<\/p>\n

It\u2019s so easy to get caught up in these events, and seeing these market moves may lead to investors straying from their investment strategies. When this happens, investors often find themselves in the unenviable position of selling high and buying low, which is a sure way to get further away from your financial freedom summit.<\/p>\n

However, if we look at graph 2 (a view of the ALSI over 60 years) we see a much smoother line. Going back to our analogy, these short-term changes are similar to reaching a steep part of climbing a mountain. Your heart might start racing and you need to pay closer attention to your footing, but looking at the bigger picture, it has brought you closer to your destination.<\/p>\n

The market is not static, which means your investment plan shouldn\u2019t be either. It is thus important to review your strategy regularly and remain cognisant of market events for beneficial changes. As long as you keep the long-term picture in mind and do not make changes for the sake of making changes.<\/p>\n

Graph 1: JSE All Share over five years<\/span><\/b><\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Graph 2: JSE All Share over 60 years<\/span><\/b><\/p>\n

\"\"<\/a><\/p>\n

You are not alone<\/strong><\/p>\n

The most important thing to remember is that throughout your journey to your financial freedom summit, you are not alone. Your financial adviser is right by your side to help you stay on the path, to motivate, guide and support you.<\/p>\n

Your adviser is not only familiar with available financial products, but can also help you construct a strategy to help you reach the top, having regular meetings to review and assess how your portfolio is evolving and how you can get to your financial freedom summit more quickly.<\/p>\n