To buy stocks and retire before the age of 50, rely on compounding of interest to build your funds over time, notes Steve Sjuggerud's Daily Wealth. For example, if you invest $10,000 and get a return of 18 percent, you have a million dollars 28 years later.Continue Reading
The scenario above relies on compound interest on principal without adding any more outside principal. Researching your investments in stocks and stock funds carefully, or using a financial planner with a track record of success, maximizes your return. While returns don't end up at exactly 18 percent every year, over time and with diligent research, it is possible to average those returns, notes Stansberry & Associates Investment Research.
In the scenario above, after the first year, you have $11,800 (18 percent on $10,000). This example deals in averages, so with the same assumption about rates, at the end of the second year, you end up with another $1,800 on that initial $10,000. However, you also end up with $324 more on the basis of that extra $1,800 from the first year. At the end of the third year, you have the same $1,800 and $324 added, but you also have $58.32 more -- because of the $324. You didn't have to invest any more from outside, but your nest egg is growing. Within 28 years, you have a million dollars, so you could potentially retire before age 50 without ever investing another dollar, as long as you manage investments and don't draw out of your gains, reports Steve Sjuggerud's Daily Wealth.Learn more about Investing