Is £2 million pounds a lot of money?

sabretoothtigger

Recently a man who collected old cans off the street for most of his life died a millionaire. Somehow he took the can money and invested it well and got compound returns over decades
When he died he had holes in his clothes but gold bars in the bank

Investing a thousand a month for 49 years and getting the average 12% after inflation return of the UK stock market over the period would do it.

I dont believe average returns have been that high. 7% a year only will double your capital in a decade but check the average for the last ten years and its not 7% pa

I dont think that average occurred over 20 or 30 years even but theres always luck

lol - what an unbelievable viewpoint my friend. Saving is a 'personality defect'?? 'a sign of insecurity'??

Your both right. When he says dont collect pictures of the queen its totally correct. Pound notes are paper debt not wealth.
You dont own the money its owed to you, check the small print on it


If I said I had saved up tons of money by not using all the cheques I receive you'd think me pretty silly. Holding cash is not that much better.
Better to own some real assets, your own house would be the most traditional and practical I think

Ifts

jamesd wrote: »

Regardless of the situation, just go on treating him as you always have done. Except perhaps to encourage him to ask whether there are any treatments for what ails him that aren't available on the NHS but could be available privately. Since he has the money and the need it's good to treat it as a tool to improve his situation.

Agree, health is wealth.

ETROL

From one of your previous posts

"How much can you save? (Page 237)"

TheProdigalSon wrote: »

Hi,

I'm 22 years old and save around £1,500 per month, have no outgoings other than utilities and the basics and I'm very much a frugal person who chooses to live well within his means. I wish you lots of luck in saving for a house, thought I'm guessing that after reading you posted this question many years ago that you might just have it now

Judging by this it seems that you may be a chip of your uncles block and that you may have something to learn from him

Or is there more to your post than maybe meets the eye?

MacsReturns

I expect there are a lot of single men who are similar.

Yup, that's the single biggest factor in a guy being able to keep his money

The reason I'm not sure if to believe him is because he lives very modestly and has no outwards shows of wealth

THAT is the single most convincing reason you SHOULD believe him, IMHO.

Some maths: save 75% of your income for only 5 years, and invest it wisely, you can live off that capital indefinitely. Alas, most people seem bent on living on 110% of their income...

PasturesNew

It's loads. In the past 30 years of working, I've had about £250k go through my hands in wages, after tax. So £2million is a lot.

jamesd

sabretoothtigger wrote: »

I dont believe average returns have been that high. 7% a year only will double your capital in a decade but check the average for the last ten years and its not 7% pa ... I dont think that average occurred over 20 or 30 years even but theres always luck

I'll use the First Report of the Pensions Commission because that's conveniently available online and easy to check. The Appendices use the 2004 version of the Barclays Equity Gilt Study. Here are the after inflation median returns for various asset classes over twenty year periods from the report:

gilts: 1899-2003: -0.5% after 1977: 7.3%
equities: 1899-2003: 5.5% after 1977: 11.2%
residential property: 1930-2002: 2.0%
commercial property: 1920-2002: 3.8%

Those are for fixed periods not the continuous average I gave, so you might prefer the 11.2% figure that covers most of the time when the uncle would have been investing.

There's a great deal of variation from period to period since it's sensitive to the state of the market in the first and last years. The twenty year period ending in December 2008 won't look good for equities.

jamesd

MacsReturns wrote: »

Some maths: save 75% of your income for only 5 years, and invest it wisely, you can live off that capital indefinitely. Alas, most people seem bent on living on 110% of their income...

That's a little bit ambitious but doable for average incomes in a little longer. I'll assume a £200,000 target that's sufficient to provide £12,000 in income indefinitely.

For someone needing £12,000 in living expenses it'll take £48,000 in income at 6% investment return or £44,000 at 12% return. By ten years at 12% it could provide £38,000 a year in income.

On £28,000 annual income it takes eight years of £16,000 a year invested at 12% return. By the ten year mark it could provide £17,000 a year in income.