When we see a statement like this, the first impression is to imagine that someone didn’t count. I’ll tell you how this story started. It took place here at the office in conversation with a client. I said: “I will reach R$ 1 billion and so will you”. I can imagine his expression now, for it must be similar to his when he hears it.
I’m very skeptical about everything. I’m always checking accounts to see if they really match and testing strategies to see if they work as they say and in what situations.
When someone says a very large number, I immediately think it’s silly. But I will always find out. I imagine you also thought the same.
Returning to the dialogue with the client, when I said that it was possible, he said: “it’s not possible”.
Then I knocked him down, saying: “let’s do the math”.
I did and it is possible.
Yes, it is possible to accumulate R$ 1 billion starting from scratch and I may reach it. But, it is also possible for you.
It’s not easy or likely for any of us, but it’s possible.
Let’s go to what needs to be done.
The math is simple, you need to simulate three factors: interest rate, time and monthly investment. I’m assuming you start from scratch. Therefore, if you already have some equity, you are already a step ahead.
We want to find out how long it would take. So we just need to simulate the monthly investment and interest rate.
The table above shows how long it would take an investor, starting from scratch, to accumulate R$ 1 billion. In the lines are some possibilities of monthly savings and in the columns the interest rates.
Following the table, if you accumulate R$ 5 thousand per month, with an interest rate of 1% per month, you would reach R$ 1 billion in 64 years.
I know the vast majority of the population would not be able to. I’m not talking to this majority. But with you.
More than just justifying yourself why you wouldn’t be able to reach R$ 1 billion, the exercise here is important to make you think that many smaller goals are extremely possible.
After all, does it matter to reach R$ 1 billion? I do not think so. But it is possible to save to have a peaceful retirement or achieve financial independence.
Usually, we put up barriers, we are not disciplined and we don’t even have the patience to save and see the cake grow slowly.
For example, have you ever stopped to think that you can reach R$ 5 million and have a peaceful retirement? The account is in the second table above.
Sometimes all you need is someone to encourage you and lead you on this journey. This is one of the duties of coaches in competitive sports. That’s part of what I do.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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