Back in March 2022 I have invested $120K in US500 to account of $2K monthly contributions over 5 years (2020-2024). This investment now worth about $174K, which represents 12% a year.
The target for this year is to start saving $2.5K a month ($500 uplift represents cumulative inflation at an average 5% a year of the past 5 years). This is to continue my financial independence journey.
My target is to have about $5K a month. S&P500 dividend yield in 2024 is 1.2%, this means that I need to have at least $5 million. I don’t think that is achievable if I keep doing what I am doing. At 3% real return a year, with $30K annual contribution after 30 years I will have $3.7 million. At certain stage I can stop and start “consuming” money without further contributions.
For example, $2 million at annual withdrawal $60K will last 23 years at inflation rate of 5%. There will be equilibrium between investment growth, desired withdrawal and live expectancy. Dependence on the withdrawal period commencement the money will last between 19 to 27 years.
Here is graph for the road to financial independence from 2025 to 2041:
Of course, there could be other ways (in the words of late George Carlin: “drop some of your needs”.
Western europe is now scaling back its life style. German auto industry used to make huge profits in China by selling overpriced cars, while mocking Chinese car makers in the process now laying off thousands of workers in Germany. For example, Audi reported 91% decline in operating profit in November 2024. The layoffs is only the beginning, the manufacturers will now start saving on the materials and the cars quality will suffer, leading germans manufacturers downward spiral. This are not hot news, as this has been happening over the past seven years, officially being in the recession for the past two years (which news outlets friendly to the regime called “annual contraction in record”. German government has the recipe from mid-2000s for it – keep the workers’ salary frozen, suffocating the people, while bringing migrants to replenish population which refuses to reproduce itself.
The rich people moved over $300 billion out of Germany since 2021 alone de-industrialisation is in full swing. After reliable and inexpensive natural gas pipelines were blown and not restored, “freedom gas” from the USA cost Germany arm and leg. For past two decades Germany gorged itself on exports of overpriced goods, lagging investments and diversification.Ordinary germans are already among the most taxes in the world – 47.9 of gross pay in taxes and social security. Constantly worried people were saving 20% of the income due to instability in EU.
In the USA there is a lot of optimism in the air, while the existing home sales fell to the lower level in nearly 30 years. Average 30-year mortgage cost between 6% to 8%. Insurance premiums are up and will continue to raise. The national median existing home price in the USA is now over $400 K.
With the multiple wars happening at the same time and possibility of third world war the gold continues to take new heights, hovering at $2,800 for troy ounce (31.103 grams) at the end of January 2025.
Investing in stocks is increasingly risky business. Other than full
blown third world war or smaller scale tariff one, one additional indicator that
makes stocks unattractive is gap between 10-year treasury yields and S&P500
(4.5% vs 1.2%). Of course, you need to consider equity risk premium (the excess
return that investing in the stock market provides over a risk-free rate. This
excess return compensates investors for taking on the relatively higher risk of
equity investing), which is highly subjective evaluation. However, over the short-term
stocks need to promise a higher reward than bonds. This is not happening but people
still pilling up money in S&P500.
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