We’ve all dreamed about making our money work for us, creating a life of comfort and financial freedom. A common fantasy goes like this: “I need $10,000 a month to live, that’s $120,000 a year, so if I invest $1.2 million at 10% annual returns, I’ll be set for life!”
It sounds perfect, but reality, as always, is more complicated.
Where’s the Catch?
First of all, that $120,000 will be reduced by taxes, fees, currency conversions, and unforeseen expenses. Secondly, getting a guaranteed 10% annual return after inflation is a myth. Finding investments that consistently deliver such results for decades is nearly impossible. Most importantly, investing isn’t a magical cash machine — it’s a new type of work.
Investing is neither business nor employment. It’s a unique challenge with its own set of rules:
- Risks: Market downturns and mistakes are unavoidable.
- Time: It takes years to understand how things work.
- Skills: You can’t avoid experiments and losses.
The Numbers May Surprise You
Think you can live off $1 million invested? Forget it. To achieve stable 10% annual returns, you’ll need at least $3-5 million. Why?
- You’ll lose a significant portion of your capital making rookie mistakes, as with any new endeavor.
- It will take about five years to understand the market, but by then, you might lose more during your first big crisis.
- Long-term macroeconomic missteps can wipe out your profits 10-20 years down the line.
Investing is a Marathon, Not a Sprint
Start with small amounts. Think of it as training for a marathon: you hone your skills, make cheap mistakes, and learn from them. Small steps provide big advantages:
- You build experience and gather data, which takes time.
- You have room to start over if things go wrong.
- You find reliable contractors, managers, and partners for bigger ventures.
Don’t Envy the Wealthy
When you hear about someone selling their business or inheriting a fortune, don’t rush to envy them. In 90% of cases, that capital will “burn” within a few years. And the chances that their heirs will see any of it 30 years later? Almost zero.
nvesting isn’t about easy money. It’s a business where winners are few, and mistakes are costly. But if you’re ready to learn, be patient, and play the long game, you can turn your money into a real income-generating machine.
And remember: the best time to start investing was yesterday, but the second-best time is today.
