How To Turn $12 Into $1 Million

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Everyone wants to multiply their money, but how you can turn 12 dollars into 1 million dollars? How is it possible to turn such a small amount into this big value? I will explain everything in detail, so that you and your next generations may make such an amount.

Financial education is not provided by most of the parents to their kids, and schools don’t even bother to teach anyone about, how to be financially strong? Leave all these excuses aside and let’s find out how you can make your money grow on its own.

Warren Edward Buffett, you all must be aware of this name. He always says the compounding is the 8th of the world. There are very few people in this world who understand what he wants to say, and only a few of few does what he says.

So, today I am here to tell you exactly how you can invest your money smartly. This method will help you make fortune out of an insignificant amount.

What are mutual funds

You must have heard this term in your life for once. Lately, there is so much buzz about mutual funds. People have started investing by watching some videos, and by reading them somewhere on news. But, does invest without any research will make you rich? NO! Investment with proper research is only going to make you profits otherwise you are testing your luck. That’s where mutual funds come in.

A mutual fund is an investment vehicle formed when a fund house pools investments from individuals and invest that money in different stocks, or bonds to make a profit. The fund house takes their margin and the rest is yours.

Very elite managers, manage these stocks. They do all the research on your behalf and make a pool of some best companies to invest in after analyzing their future plans and market value. The fund manager purchases securities such as stocks and bonds that are in line with the investment mandate.

Is it safe to invest in mutual funds

If you are looking for the safest investing then you have found that mutual funds are the safest investment “if done with proper research“.

This is the safest way to invest in the stock market. If you don’t know how to research the best stock for you, then you must invest through mutual funds. Fund managers do all the jobs to make maximum profit.

What to check while selecting mutual fund

Well, this can be explained in a number of ways, but I will tell in a very easy and understandable way.

1. Look at the history of that fund, how that fund has performed in last 5 years, 1 year, and in 6 months.
   This will give you the idea that you may expect such returns from that fund.
   
2. Look at the companies that fund is investing in, this is very important as you must know where your money is going. Select the fund where you find the top companies of your countries.
   
3. Look at the expense ratio, it is the annual maintenance charge levied by mutual funds to finance its expenses. The lesser the expense ratio the more will be your profit. Even a small percentage will make significant difference in your profit when you have huge amount of money in your portfolio.
   
4. Look at the exit load, it is a fee charged by the mutual fund houses if investors exit a scheme partially or fully within a certain period from the date of investment. You must check for this as it will also impact your earnings.

Keep these 4 steps in mind when you are looking to invest in mutual funds, they will help you to select the best fund for better profits.

How to turn 12 dollars per month into more than 1 million dollar

Well, isn’t it nice to have such returns? So, let’s learn how to turn from almost nothing to such a huge amount.

You have heard of the term SIP (Systematic Investment Plan). Yeah dear, this is it. Now, remember the little advice from Warren Buffett about the power of compounding.

Power of compounding

It’s time to revise the formula we used to study in our schools to calculate compound interest.
The formula for compound interest is P (1 + r/n)^(nt).

1. P is the initial principal amount.
2. R is the rate of interest
3. N is number of times interest applied per time period
4. T is number of time periods elapsed

Now, let’s take n =1, as interest is calculated annually in most of the cases. T is time and has in a place where it will make your profits grow exponentially.

The formula itself reveals that the more time you will keep your holdings the more you are going to make a profit. Now, you might be wondering that why I am talking about all this and not telling you what you came here for. Sorry for taking so much time to reveal that, but I thought that you must know how these things work so that you will believe what I am going to tell you now.

Step by step guide to turn 12 dollars into 1 million dollars

1. Choose a mutual fund by doing some reseach, click here.
   
2. Fund must have returns of almost 18%, you will find them easily or I’ll suggest some later on.
   
3. Invest intial amount of $100 into that fund.
   
4. Invest $12 every month.
   
5. Time is the key, invest them for almost 40 years (So start investing early 🙂 )
   
6. BOOM! You have $1,157,152.16 by that period.

Was that tough? No, not a all. All you need to do is start investing as soon as possible. The amount is not an issue here, just $12/mo should not be a big deal as we spend more than that on pizza, soda, video games, and hell other things.

If you notice one thing here, the time period is too long(some people would say) but we have said that earlier that if you want to see the power of compounding then wait, wait, and wait. If in the above scenario you have invested for 39 years, just one year less then you would have the final amount of $967,694.66 instead of $1157152.16. The difference of $1,89,457.5 in just 1 year, and you have only invested $144 in that one year. I hope you must have understood the importance of even one year, as you have seen the impact it will bring to your profit.

Mutual funds that provide more than 15%

“You must do your own research”. Here are few mutual funds that provide returns of more than 15-16%.

1. Vanguard Tax-Managed Capital App Fund: This fund has returned 38.01 percent over the past 1 year, 18.77 percent over the past 3 years, 17.87 percent over the past 5 years, and 15.52 percent over the past decade.
   
   
2. GMO Quality Fund: This fund has returned 39.38 percent over the 1 past year, 19.82 percent over the past 3 years, 19.13 percent over the past 5years, and 16.08 percent over the past decade.

Choose funds as per your contury’s market, these funds are of the US market

Final thoughts

Well, I am glad that you have read this till now. The takeaway from this article is that you must start investing as early as possible no matter how small you start. You have seen that how $12 per month has turned over a million dollars in 40 years, you may invest more say $20, or $50 per month, and check your returns using the SIP calculator.

I hope you will start investing after reading all this power of compounding things, this post is worth sharing with your friends, and families. Share the knowledge and ask queries in the comment section, I’ll try to clear your doubt, till then bye-bye, take care. See you lads in the next one.