Why is the blog called 18 Years to Millionaires?
The name on the blog is “18 Years to Millionaires”. But what do I mean by that actually? It’s a really catchy name, but it is a bit misleading to be honest. I’m quite sure my kids’ portfolio will not be over 1M in 18 years from now. That would require us to put in an additional cash investment of 24 000 euros to the portfolio every year for the next 18 years with an expected annual return rate of 8 %. Realistically, if we manage to put in 5 000 euros every year I would be pleasantly surprised. 5 000 euros a year is also the amount one can donate without taxes on average to two kids over the years (7 500e every 3 years for 2 kids = 5 000e/y), when the new gift taxation laws come to effect.
It’s always good to have high ambition. But like said with an 8 % expected return we would need to put in so much cash to reach 1M euros that it just sounds stupid. The other way to do it is to increase the return of the portfolio. Let’s assume we manage to put in 5 000 euros every year. Then, to reach 1M euros in 18 years would require an average return of 19,4 %. Considering that the portfolio is investing in a mixture of growth stock, cash cows, index funds and also holds some cash, having an average return of almost 20 % is close to impossible. At least with my investing skills.
The third option is to use leverage. But without any calculations it is easy to see that getting even close to 1M euros would require a ridiculous amount of debt. We are hesitant in using much debt as we are building a long-term stable portfolio to also educate our kids along the way.
Thus, it seems that reaching 1M euros in 18 years is impossible for us. But the name of the blog can also be interpreted in another way. By investing to our kids’ porfolio systematically from a very young age, we are setting them up to be millionaires at some point. If we do our financial education right, they will inevitably reach that. Honestly, having a 100k euro portfolio at 18 years old is 100k euros more than what me and my wife had when we turned 18. And if you grow in a family where financial education is present and investing is a common hobby, the chances are that the kids will get from 100k to 1M by themselves, and beyond.