One of the bloggers (Of Dollars And Data) I followed published an interesting article this week. It's about how much growth you can expect over different time periods.
In his article, he did stimulations for fixed DCA investing of $10,000 each year across different fixed intervals (10 years, 20 years, 30 years etc) from 1970 to 2022. Inflation is adjusted for and dividends are adjusted. There are two portfolios mixes here: one that is 80% U.S. stocks, 20% U.S. bonds, another that is 80% Global stocks, 20% U.S. bonds.
From his simulations, he derived the median value of growth of the portfolio over the different fixed intervals. You may read the full article here.
If you want to jump straight to the results, here are his findings.
For a time period of 10 years, the portfolio grew by 1.5X.
For a time period of 20 years, the portfolio grew by 2X.
For a time period of 30 years, the portfolio grew by 2.5X.
For a time period of 40 years, the portfolio grew by 4X.
I think these are interesting findings that can help to determine how successful you are in your retirement plans.
For instance, if you think that 3M is needed for your retirement and have 20 years to go till your ideal retirement age, then you need to be able to invest 150K every year for the next 20 years (provided you have zero amount in your portfolio right now). If you need 2M for your retirement and have only 10 years to go, you will then need to invest 200K every year for the next 10 years.
This could help you determine how much you should set aside and how realistic your goals are. Very often, many of us might have a retirement sum and retirement age in mind. However, it's often hard for us to visualise how much we will need to put aside each year in order for us to reach our goals from a statistical point of view. Those findings published do help to address that concern.
I have also created a diagram to help you better visualise this.
If you see that you belong to the area under the curve, do not panic. This is a simplistic graph which does not take into account any future DCA that you might be doing in the years from now till your ideal retirement year. With those DCAs, you might then be on track for your retirement. For instance, I might only have only 15% of my retirement sum set aside now and therefore below the area under the curve. However, if I diligently DCA funds into my portfolio over the next 20 years to reach 50% of sum invested, I could still be on track for my retirement. For those who are already on the area above the curve, that's certainly good news as your chances of retiring successfully are high even without any new funds added into your portfolio in the coming years.
I'm currently doing a poll on this. If you are interested to take part, do join my Telegram channel. 140+ like-minded investors have already joined this channel. What are you waiting for?