First millionaire is hard, second millionaire is easier

 

 

Source: Galerea

We have read umpteen times the rags to riches stories, though inspiring but ironically, those are the few who moves to the top of the pyramid. Most don’t. 

The gap between the rich and poor is not going and will never narrow. So the cliché: The rich get richer while the poor get poorer.

The first millionaire is always the most difficult, and if your definition of rich is at least a multi-millionaire then it’s as good as climbing Mt Everest on a wheelchair.

I will stick to a million.

For an average person who has $10,000 of surplus, should he invest intelligently, and receives conservatively a return of 10% p.a, he will need to compound that earning 48.3 times before he reaches his first million.

A millionaire with a million to invest, should he invest un-intelligently and receives a petty return of 10% p.a, he will need to compound that earning 7.2 times before he gets his next million.

This may be an overly simplistic view but consider the options between the two and the years required to make a million. Should the average person invests at the age of 30, he will become a millionaire when he reaches 78 years old.

The same goes to the rich man, he will be 37 when he gets his next million.

Notice I mentioned above – invest intelligently and invest un-intelligently. It’s easy for a person with a million dollar to be offered investment opportunities that yield him more than 10% a year. Consider the private financial products that are only available to the high net worth. This person isn’t too investment savvy if he manages to net only 10% p.a.

The average person who invested very intelligently is still running an unfair race with the rich. No private banking products for him. Limited capital means limited opportunities. 10% p.a could be a good year or normal profits, to make mega profits he will need to have superb foresight. That’s most probably the rags to riches stories we know. The rare accumulator of wealth. Most don’t.

This scenario is even more distinct in a capitalist economy.

So it’s better to be an un-intelligent man born with a silver spoon than an intelligent man born with little resources. MBAs and PHDs don’t count, a silver spoon is worth a lot more than paper qualifications with greater intrinsic value.

Who will be offered better opportunities? The one who mingles in a circle of rich men or the one who mingles in a circle of ordinary men, each with $10,000 in surplus?

Opportunities are not equal though every government would like you to believe otherwise. The rich and poor don’t start the race at the same level. Any changes in prices, most commonly petro, housing and commodities put the burden on poor while the autonomous increment hardly bothers the rich.

Look at the growth of wealth between the two classes and their autonomous spending, it’s a no brainer who’s getting all the knock-outs.

So…

Good fortune to you if you are rich and good luck to you if you aren’t.