Several factors can make you a millionaire sooner:
- Savings
- Investing (buying good stocks in a market selloff helps tremendously!)
- Time staying invested
How much are you saving regularly?
Saving regularly or spending less than you earn is the first step in working towards being a millionaire. Ideally, you would pay off your consumer debt, such as credit card debt, every month with money left over.
The general rule of thumb is to save 10-20% of your after-tax income. When you’re able to save every month, wealth building begins. The earlier you start saving, the better. But you shouldn’t stop there. Let’s say you’re saving $500 a month; it’ll take more than 166 years to reach $1,000,000!
After building an emergency fund that covers three to six months of your living expenses, you should consider putting excess cash to work by investing it for satisfactory returns.
What rate of return are you achieving?
The higher your savings rate and the higher the rate of return you can achieve for your investments, the sooner you’ll hit $1,000,000. This is where buying good TSX stocks in a market selloff comes in.
Despite the stock losing half of its value in this market selloff, goeasy (TSX:GSY) stock has still delivered a compound annual growth rate (CAGR) of about 33.7% in the last 10 years! It is clearly a market outperformer.
It made millionaires of goeasy stock investors who’d invested approximately $54,788 a decade ago. Most people don’t invest in such a big lump sum, though, unless they’ve got an inheritance. A more common scenario is for investors to invest much smaller amounts (their savings) periodically.
goeasy also happened to experience a decade of massive growth, resulting in an earnings-per-share (EPS) growth rate of about 29% per year. It’s a big question mark on whether it can achieve that kind of growth over the next decade.
Give time for your investments to grow
I believe the non-prime consumer lender is essential in serving a certain niche of Canadians who can’t borrow money from traditional means. Throwing in inflation (especially as high as it is now), there’s a good chance the company can increase its EPS at a CAGR of about 15% over the next few years.
Let’s be more conservative and say it increases its EPS by 12% per year over the next 10 years, continues to pay a yield of about 3%, and steadily fills the undervaluation void to deliver annualized returns of about 17% per year. By investing $500 a month at the beginning of each month, investors will arrive at $146,434 at the end of the decade. To achieve $1,000,000 under this scenario, an investor will need to invest $3,414.50 every month instead.
The earlier you start investing, and the longer your money stays invested for a satisfactory return, the sooner you could become a millionaire.
goeasy stock could make you a millionaire (or get you much closer to being one)
The market selloff has dragged goeasy stock’s valuation down, making it discounted by about 20% from its long-term normal valuation. Heck, analysts think the stock is on a big sale — it’s almost half off!
The TSX stock yields about 3.4% and could very well deliver annualized returns of 17% over the next decade, which would outperform the long-term average market returns of 7-10%. Therefore, no matter what, it’s a good time to accumulate goeasy shares.
That said, it’d be smart to not put all your eggs in one basket. Check out other top TSX stocks as well.
