Very short term - is there anything worth doing | Page 3 | General comparisons | Discussion forum

Alexandre said

You have $10M in cash. You plan to spend $200,000 annually on yourself (in last year dollars). This year it'll be $210,000 with 5% inflation.

You park $10M at 3% 1yr GIC interest rate. You'll end with $10,300,000 at GIC maturity. You spent $210,000 (add 5% inflation to last year $200K spent).

At the end of the year you have $10,090,000.

I think it is OK to sleep well at night.

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Next year. You start it with $10,090,000. Same inflation rate, same GIC rates.

Deposit money into 3% 1yr GIC again. You'll end with $10,392,700 at GIC maturity. You spent $220,500 (add 5% inflation to last year $210K spent).

At the end of the year you'll have $10,172,200.

I think it is OK to sleep well at night next year, too.  

The person who has $10mm will not be doing that, or wont have 10mm to begin with in the first place. Rich gets rich cuz they dont think like your example shows.

Alexandre said

If you don't have $10M, your thinking about how rich do think is as good as mine. 🙂  

I think more correct than u

savemoresaveoften: The person who has $10mm will not be doing that, or wont have 10mm to begin with in the first place. Rich gets rich cuz they dont think like your example shows.

They do get there, it just takes longer. It is not the speed, but the steadiness. It is by choice missing the parties but also missing all the hangovers. No out-of-whack acupuncture meridians, no panic, etc. "In a long run" the market goes up, however, "in a long run" I'll be dead.

MG said
Actually you forgot all the income tax you will need to pay on the interest earned. With $300K interest income, you will pay close to 50% in tax. So you will be negative versus your starting $10MM.   

With income tax added to example, I'll be parking $10M at today's actual 5% 1yr GIC interest rate and will end 1st year with about $250K after paying taxes. I'll assume inflation of 7%, which means my expense will be $214,000 ($200K of last year plus 7% inflation).

At the end of the first year I'll have $10,036,000.

It gets even better if I win $22M as I plan to. I will double spending on myself. So, $428,000 spent on myself paid from $550,000 after tax interest income.

julio said
They do get there, it just takes longer. It is not the speed, but the steadiness. It is by choice missing the parties but also missing all the hangovers. No out-of-whack acupuncture meridians, no panic, etc. "In a long run" the market goes up, however, "in a long run" I'll be dead.  

About 2% of Canadians has total assets between 1-5MM USD, and thats total assets not just liquid assets. One can safety assume way less than 1% of Canadians have investable assets of 10mm or higher.
For those 99%, they need way more than just steadliness to amass 10mm investable asset, esp taken into account their life expectancy. The math is cruel but real. The emphasis 'in the long run' is the word long, and longer than the average Joe's life expectancy. Of course it is different if Joe can plan to win the lottery !

savemoresaveoften said
A lot of people only think of risk as potentially losing their principal, so GIC esp with CDID protection is '100%' safe. In reality if one is earning a 3% with 100% protection, yet inflation is running at 5%, they still sleep at nite cuz its ONLY losing 2%, if they even think that way...  

I am surprised that this narrative still exists. Or maybe I'm not surprised.

Inflation is not the same for everyone.

I will take 7% CPI and 5% GICs any day of the week.

Alexandre said

Over the past few years, surveys have shown that as high as one in three Canadians are looking to pay for retirement by winning the lottery.

Mark my words, it is possible for everyone to end up a winner in equity investment lottery. It is because lottery is just another form of investment.*

* Too bad HTML tags for sarcasm have not been invented yet.  

Everyone who invested in a diversified equity portfolio consistently over the last 10, 20, 30, 40 or 50 years has been a “winner”, typically doubling investments every 7 years or so. I don’t buy lottery tickets so defer to your experience on it being exactly the same.

Alexandre said

Over the past few years, surveys have shown that as high as one in three Canadians are looking to pay for retirement by winning the lottery.

Mark my words, it is possible for everyone to end up a winner in equity investment lottery. It is because lottery is just another form of investment.*

* Too bad HTML tags for sarcasm have not been invented yet.  

My advice to those who counts on winning the lottery to pay for retirement will be: it’s better to invest GIC at 3% while inflation is 5%, then spend $$ a week on lottery, even tho they don’t have $10mm to invest.

One can always hope for the best, winning a meaningful lottery is a wild dream, not even a hope,

It was a November 2013 Pollara online poll, sponsored by Bank of Montreal, that found 34% were relying on a lottery win for retirement.

CBC reported the poll's findings in Lottery win is retirement plan for 34% of poll respondents (January 30, 2014).

I'm not surprise by the result about lotteries. Many people don't really understand how unlikely odds like 1 in 14 million are.

The difference between 1 in 14 million for 6/6 and 1 in 2.3 million for 5/6+Bonus for the 6/49 draws is not material. Those wins are still not going to happen during almost every player's lifetime.

The 5/6 odds is much better at 1 in 55,492. But, the payout in the last Lotto 6/49 draw for having 5/6 was just $914.20.

According to US National Weather Service, the odds of being struck by lightning in one's lifetime is around 1 in 15,300. So, it is very unlikely one will ever have a 6/49 ticket that turns into $914.20 in a lifetime.