I am struggling with a thought exercise/math problem where I would appreciate this board's guidance. Assumptions:
(1) I follow KlangFool's rule: each year, I spend $X and also invest $X into index funds.
(2) I am a renter and do not own a house nor do I own any other property. I am a W-2 employee and do not own any businesses (LLCs, S-Corps, etc). Therefore, NW changes are solely driven by the annual amount invested into the stock market and corresponding gains/losses in the stock market.
In view of the above:
(1) Assuming yearly expenses of X, at what (invested-in-the-stock-market) net worth do yearly investments of X matter less (because growth is driven largely by the amount that is already invested)? I'm having a hard time quantifying "largely" so appreciate feedback here.
(2) Assuming yearly expenses of X, at what (invested-in-the-stock-market) net worth do yearly investments of X cease to matter at all (because nearly all growth is driven by the amount that is already invested)? Here, I'm having a hard time quantifying "nearly all."
(3) Do your answers to (1) & (2) change if, for example, X = $10,000 vs if, say, X = $500,000?
(1) I follow KlangFool's rule: each year, I spend $X and also invest $X into index funds.
(2) I am a renter and do not own a house nor do I own any other property. I am a W-2 employee and do not own any businesses (LLCs, S-Corps, etc). Therefore, NW changes are solely driven by the annual amount invested into the stock market and corresponding gains/losses in the stock market.
In view of the above:
(1) Assuming yearly expenses of X, at what (invested-in-the-stock-market) net worth do yearly investments of X matter less (because growth is driven largely by the amount that is already invested)? I'm having a hard time quantifying "largely" so appreciate feedback here.
(2) Assuming yearly expenses of X, at what (invested-in-the-stock-market) net worth do yearly investments of X cease to matter at all (because nearly all growth is driven by the amount that is already invested)? Here, I'm having a hard time quantifying "nearly all."
(3) Do your answers to (1) & (2) change if, for example, X = $10,000 vs if, say, X = $500,000?
Statistics: Posted by jaqenhghar — Thu Jan 18, 2024 6:39 pm — Replies 0 — Views 16