How to Build $1M

How to Build $1M


·December 5, 2021


Nice, but I would be more interested if they also took inflation into account. How long would it take to reach 1mm _in todays dollars_? 1mm in 45 years could be something like $330,000 in today's dollars (calculated with default values from this calc: I'm not following financial markets at all, but I noticed the other day that this year the US had maybe the highest inflation rate since around 1990?


The simplest way to do that is to input an inflation adjusted rate of return.

So, if your expected rate of return is 7%, and your expected inflation rate is 2%, then input 5% and you will get an inflation-adjusted version.


What I've found interesting this year is the response of the "average" US person to inflation - by which I mean somewhere between panic and grave concern.

Whereas where I live inflation has been in the 3-6% band, give or take a bit, my whole life. At the moment it's near the top of that band. And to be clear people here have complained about it my whole life too.

But inflation has 2 interesting attributes. It devalues savings (so instead encourages either plain spending or asset-other-than-cash accumulation, and it also devalues loans.

In other words it intrinsically encourages things like home-buying, (mortgages can be used here as savings accounts as a store for savings, thus saving interest and offering effective rates same as your mortgage).

Hyperinflation is bad, but we're not talking about that.

And if you are on a fixed value pension then sure, it's getting smaller. (hint: avoid fixed value pensions, that always ends up being worse than you think.)

In short inflation is not good or bad, it's just a part of life that offers a bunch of upside for those that keep their eyes open.


> So, if your expected rate of return is 7%

I believe it is typically closer to +10% and then -3% inflation leaves you with 7%:


With current banks, most of them having negative interest, this method will make sure your grandkids will become poor if you put today a million dollars for them in an account. Best way is to invest instead of deposit.


What method? It doesn’t appear to tell you what to do. I only see examples.


The final header does suggest investing. This pages defaults to a 7% rate of return which is clearly impossible with savings accounts and CDs.


An OK resource, but very much "draw the rest of the owl". Compounding interest is indeed powerful. But good luck finding a savings account that gives you 5%...


Assuming the money is invested in stock market.


Then perhaps needs to include variance?


... and the other risks. I use the word 'risk' in the English sense and not the borderline deceitful co-option of the word by the finance ecosystem -- I guess one appears smarter if one replaces 'increasing' with bull. Consequently, a lot of bull is what we get.


Ok, fine, but what kind of investments will give you a secured 7% return over that period of time?


Interesting you bring this up, because the average assumed rate of return for pension funds is 7.7%:

You may have noticed various pensions being bailed out by taxpayers - assume this will continue, although the rampant and excessive inflation is also alleviating this problem (to the detriment of beneficiaries).


This is from memory, but here's what went down in Calif.

The accountant for the public pension funds gave the numbers for 6%, 7%, and 8% returns. Obviously the 8% annual return was the least likely to be sustainable.

To maintain favor from unions, 8% was selected by politicians. (Around 20%-22% of any population worldwide works for the state, so public unions easily capture their politicians.)

And here we are, with every city and county in Calif. headed off a cliff. (The only exception I'm aware of is Mountain View, which owns a business park that contributes 1/3 of city revenues. Some towns further north on the peninsula are complete basket cases, with some getting fleced in the 2008 meltdown.)

So if the accountant had just quietly omitted 8%, bk wouldn't be looming as certain as 7%.

A former San Jose mayor tried to reign in pensions, and was vilified for even trying.

The trope is, "Every town in California will have one city hall staffer to write checks, with 100% of town revenues going to public pension retirees."

One town accountant said, "I felt physically ill writing pension checks to a 39 yo healthy retired firefighter." because that check stream would go on until he was probably 100 yo, contributing to bk'ing the town.


That 7% default does seem rather optimistic. I would consider 5% nominal or 3% inflation-adjusted more reasonable given today’s market conditions.


This perspective seems common, so I’m curious where you are keeping your money that you have been seeing returns in the 5% range given that basic S&P 500 index funds have turned in a 10-year average of closer to 17%.

What types of investments are you using to generate the perspective that 7% is rather optimistic?


I was thinking US stocks.

US stocks have experienced stellar returns over the past 10 years that exceed growth in underlying earnings. Returns over the next 10 years will likely be lower as the stock market reverts to the mean. The cyclically-adjusted P/E ratio (CAPE ratio)—defined as current stock price divided by average annual earnings over the past decade—is a common way of looking at mean reversion. The relevant results can be found in Figure 5 (page 10) of a 2016 study by StarCapital Research [1] or Figure 1 of a 1996 study by Robert Shiller [2].

As of Fri Dec 3 2021 the CAPE ratio for the S&P 500 was ~38 [3].





I was hopping for list of ideas, like what kind of investment give how much return, along with the risk:

- real-estate -?

  -  rent vs flipping 
- pension funds - ?

- mutual funds - 5-8% annual?

- stock market -10%-20% over 10 years?

- bank savings 2%?

Strategies ?

Diversification ?


You won’t get those returns without some risk, so “secured” is out. Try a total stock fund like VTSAX.


Shiba-inu coin, NFT's, and GME. Just trust me.