I am a fresh grad (age 23) working at a tech company in the Greater Seattle area. I expect to remain with $2,000 a month post all expenditure. I would like to consistently invest $1,500 a month on a long term basis (15+ years). I am short of ideas & would appreciate some suggestions! Thank you.
– Shambhavi Choudhary
Congratulations on the job, having $2K, free cash, and planning to set money aside for your future.
Starting to invest early is one of the best things that you can do. The more time you have in the market, the greater chance there is for your money to compound and grow.
If you invest $1,500 / month — or $18K / year — and assuming that your investment will be earning 8%, you can expect to have over $500K after 15 years. If you continue at that same rate, your money would grow to almost $900K after 20 years, over $2.2 million after 30 years, and 42 years later, when you reach your 65th birthday, you would have almost $6 million. Of course, the more you invest, the more money you might have. Since you are working for a tech company, there is a reasonable expectation that your salary will continue to grow, unless theand take over your job. 😉
Assuming that’s not the case, let’s assume that you receive a 3% raise annually and you increase your investment proportionally. So this year, you would invest $18K, next year you would invest $18,540. the following year, you would invest $19,096, etc. If you did that, by the time you reached your 65th birthday, again assuming an 8% annual return, you would have almost $10 million.
This is just for that $1,500 per month that you discussed investing. I am assuming that you are maxing out your 401(k) investment as well. That would essentially double this estimate given that you can invest $18,000 a year today. Of course, if your employer matches a portion of your contribution, you would have even more cash.
I would suggest investing in broad-based index funds. The S&P 500 index has return an average of 9.70% (including dividends) over the past 50 years.
Best of luck.
originally published on Quora