How to make 1 million by investing 5K monthly? How long will you be able to make one million pesos if you are investing 5 thousand every month?
What if you invest your 50K savings to stocks or mutual funds then add up 5K every month, how much will you be getting if you do that in ten years?
I get asked with these questions so many times, probably because the most common budget of typical investor is in the range of 5K allocating it to their investments every month.
I decided to share here how much money you will be getting if you put up your 5K monthly savings to different investments wheels: savings account, bond fund, balanced fund and equity fund in 10 years.
Calculations are for demonstration purposes only and should not be considered as expert advice. Investments have risks. Every investor has his/her own risk tolerance, financial status, objective and financial know-how. Every investment you make is your own decision. Do your own research before investing.
How to Make 1 Million by Investing 5K Every Month
1. Your 5K Investment Every Month Could Give You:
5,000 investment per month in 10 years. Note that we used average return of 10% with Equity Fund, 8% with Balanced Fund, and 4% with Bond Fund. Values do not include taxes, sales load, redemption fees and management fees.
2. 5K Monthly Savings with Initial Investment
5,000 investment per month in 10 years with initial deposits. Note that we used average return of 10% with Equity Fund, 8% with Balanced Fund, and 4% with Bond Fund. Values do not include taxes, sales load, redemption fees and management fees.
3. Equity Funds Investment
If you invest your 5K every month to stocks or equity funds from mutual funds, you can generate more than 1 million in ten years if your investments grow an average of 10%.
You can be earning more money if your funds perform better than 10% interest rate. I only use this approach since historically speaking, in the past few years, equities did not perform well compared to earlier years ago with 12% or more growth.
Choose the right funds and investment houses. Even though stocks performance were disappointing lately, there are still investments that could provide you good returns like that of these equity funds: Philequity Fund and Philippine Stock Exchange Index.
Anyway, assuming we applied 10% rate, the return is still generous. Your 600,000 total investment could grow into 1,007,288 in ten years. Your 5K just did a great job! If stocks performed better, your money could increase, and you can take home more profit.
4. Balanced Fund Investment
If you invest your 5K every month to moderately aggressive funds like that of Balanced Funds, you will generate close to a million in ten years if your investments grow an average of 8%.
Again, assuming we use 8% interest rate for a conservative approach, you will be making 906,415 if you invest with Balanced Funds. Balanced Funds are composed of fixed income and well-preforming stocks.
Like I will always say, choose the right fund carefully. In spite of market sentiments, there are still some Balanced Funds that could perform well. Example below, First Metro Save and Learn Balanced Fund.
5. Bond Fund Investment
If you invest your 5K every month to conservative funds like that of Bond Funds, you will generate an estimated amount of 735,880 in ten years if your investments grow an average of 4%.
Bond Funds are known as medium-term investments. Although it is recommended to stay invested with these funds for 3 years or more to achieve higher earnings potential, staying invested for 10 years can also maximize your revenue since more fixed income money instruments mature.
6. Time Deposit Investment
If you invested your total 600,000 to time deposit account, it will become 622,791 after 10 years. Time deposit will give you fixed income and there is not much risk in keeping your money. However, your money potential is also not much.
7. Savings Account Investment
If you save 5K every month and keep your money to regular savings account, in 10 years you will be making 607,490. You will have the lowest risk keeping your money but it will also have the lowest earnings potential.
5K Monthly Investing Tips:
Invest for long term
Long term investing has been proven rewarding for passive investors. Although stocks and equities did not perform really well in the last 5 years, investing for long term is a good approach especially if you choose the right funds.
If you set aside 5K every month and you want to invest it for 10 years, it is considered as long term investment. Keeping it invested with savings and time deposit account won’t give you much income although you have lower risk.
Invest only what you are comfortable to lose
Do not put your money to regular savings and time deposit UNLESS it covers majority of your income or it is your only money. If you won’t be needing around 20% of it anytime soon, invest it.
Investing it with Balanced Funds and Equity Funds could generate more money in the long run. While you invest your 5K every month, you are also averaging the cost of your periodic money placements. This somehow minimize the risk of losing some income when placing the investment at one time.
Do not ignore initial placement
You can invest a sum of money initially then add up your regular investments. For example, you may want to invest 100K then place 5K every month. Your initial fund can appreciate in value especially if you open the investment when the market is down or when shares are cheap and fair to buy.
Now you learned some ways how to make 1 million by investing 5K per month.
Feel free to ask questions in the comments or share your views. Cheers!