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Comment by speedplane | Hacker News Reader

The premise of this article is that if you work hard and build a large pool of cash, you're "set" for life. So many problems with that. Most people, despite high pay and best efforts, continue to live the rat-race.

That said, what I hope is insightful about this article is that it teaches that having money can easily lead to having much more money.

If you start with $5M in the bank from family or whatever, you can make more from interest than most experienced professionals in any field can make from their skills. Meaning, sitting on wealth is often far more profitable than trying to earn it.

It's a testament to how money disproportionally begets more money and how inequality seems to almost naturally increase.

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Please help me understand how one can possibly live a good life, let alone prosper for decades with $5M in the bank without actually spending these millions.

When I look around here in Europe, even a 1% interest seems hard to get - some people even pay to have their money in the bank.

Even if you get 1% interest on average through the years, it's just 50k before tax which is can be barely enough to support a family in the developed world.

Stick it in an index fund and you'll probably get at least 4% per year on average. That's 200k.

You start to learn how to invest that money, which is a job in itself. You can't just put it in T-bills or bonds and call it a day.

It's not impossible to book 10 to 15% (or higher) returns by actively managing your money. But it's not exactly easy.

Look for long term stocks - ones with real value that also pay dividends. You can get dividends in the 3-5% range. You also hope that the stock price will at least keep up with inflation, but that is a separate issue to track.

Other options include buying a small business. Some don't require their owner to put in full time to make OK money.

Small businesses can definitely be great, since you (generally) don't need to put in much equity and can acquire the business mostly with debt.

A $3 to 500k investment might yield you an annual $300k owner salary.

Can you provide examples of what types of businesses for this profile?

US Treasury bonds are currently yielding more than 2.5% and are generally considered pretty safe. And even though a bank account is a terrible place to stash so much money, I think you'd find a better than average interest rate if you did have $2 million to stick in the bank.

1% is what the bank gives you on a standard savings account, investment saving accounts would yield higher returns 5-8% yearly is not unheard off.

And yes taxation in Europe makes accumulating wealth nearly impossible which is why almost all the money in Europe is old money.

Shell is yielding over 6% and depending on when you brought your implied yield is much higher

FIRE literature typically uses a 4% withdrawal rate. In some calculators that's the same as the supposed return on investment, some allow you to specify your own return on investment. In US index funds 4% seems like a "safe" lower bound.

You do know that this low interest period is very unusual?

You also need to read up on investing if all you think you can do will 5 mill is stick it in a bank account

>it's just 50k before tax which is can be barely enough to support a family in the developed world.

That's enough for Eastern Europe, as a example.

It's no use being jealous of those that have lots of money. It comes with it's own problems, by the way.

The good lesson of the article is this: If we spend less than we make (no matter the amount), we can eventually stop working if we allow the magic of compound interest to work for us.

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