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How to become a Billionaire

Posted on May 11, 2008 by Paul White

After thinking about stocks and return on investment.  I began to think about what it would take to make a million or even a billion dollars in a lifetime, or even a short amount of time.

Start with an initial investment of 10K
At the end of each month add 1K to it
Set a goal to grow your money through stock trades at a given rate.
Ignoring Taxes you money would grow like so
When growing at 2% / month
1 year: 26K
5 year: 146K
10 year: 608K

Now lets say you are aggresive and are able to grow your money by 5% / month
1 year: 33K
5 year: 540K
10 year: 10.9M

Now lets assume you have god like powers and can grow your money by 10% / month
1 year: 52K
5 year: 6.0M
10 year: 2.0B

How realistic are these figures?  Well like I said before this is not including the capital gains taxes I would have to pay at the end of each year.  I still need to create a spreadsheet that wold take that into account.  The other issues is liquidity.  As you make more money it becomes harder to grow it.  When you are only working with 10K you can dump it into a single stock and wait for it to go up then sell making a nice return. 10% is not even that unrealistic if you are dealing with smaller investments in larger companies.  But when you are dealing with millions, anytime you buy or sell your stock it is going to have a dramatic effect on the price.  Its not like you could just put in a limit sell for 2 million shares.  Once people see someone is selling a large volume of stock on the level 2 quotes they are sure to bail selling pennies under your asking price.  You have to remember that stocks are very phycological.  Even though we all want to believe that a stock's values is based on the company's earnings, and its profits ( or lack of ), ultimately its based on what people think its worth.  The average investor on walstreet makes about a 12-13% return on their money.  This is under 1% / month.  So to say we might make 5% / month is extremely aggresive.



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