Over the years, whenever I tell my friends that I am going to be a millionaire, none of them really believe in me… But at least they are polite enough not to laugh at me in my face… though I seriously think most of them think I am dreaming an impossible dream… But, am I?

Is it really possible for an average individual (i.e. an individual not born with a golden spoon, doesn’t have Bill Gates’ IQ, and doesn’t have the looks of Angelina Jolie/Brad Pitt) to become a millionaire?

The answer is a definite YES…. why so? The method is actually very simple….

drum roll please….

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through

“COMPOUNDING” your money

Albert Einstein once said:

The most powerful force in the universe is compound interest.

I worship this statement, because I know that this simple truth is the only answer I need in my quest to becoming a millionaire… Being a Math nerd like I am, I naturally translated this statement into numbers…

Assume I start with $10,000…

If I can compound this amount at 5% per month,

After 1 year, I would have $10,000*(105%)^12 = $17, 958.56..
a pretty decent growth… but still miles away from a million….

After 2 years, this $10,000 would have grown to $32,251…
Still far from a million….
but notice that in the second year, my money has grown from $17,958.56 to $32,251… an increase of $14292.44…
whereas in the first year, the money only increased from $10,000 to $17,958.56… an increase of a mere $7,958.56….

That’s the beauty of compounding your money… the longer you compound it, the faster it’ll grow…

If you can leave the money alone and let it continue to compound… after 8 years, this $10000 would have compounded to $1,081,864.10… That’s $1 MILLION…!!!!!

So, plainly speaking… If we can set aside a certain amount of money and let it compound… our money will grow at a faster and faster rate until it eventually becomes a million dollars!!!!

Of course, the above example assumes

1) You have $10,000 to start with
(which I have.. and I think most people should be able to accumulate if they are frugal and hardworking enough)

2) You do not need to touch this $10,000 for the next 8 years (not a problem as long as you still keep your job)

3) You are able to compound this amount at a constant rate of at least 5% per month…

Now, point 3 is where it gets ugly… that’s the challenge… which is why I explore options trading… cos only with options trading (or other forms of trading that offers some form of leverage*) can I hope to achieve this growth rate… I’m glad to say that my performance is so far pretty decent… maintaining a growth of about 5-10% per month….So, will I become a millionaire one day??? Time will tell… although I can’t imagine why not… maybe not by 2012, maybe not in 8 years time… but definitely one day….. and I don’t intend that one day to be when I am in my 60’s…

So, join me in my quest… and we can learn and strive together…

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*Leverage: Another ugly word… a double edged sword… I’ll talk more about that in another post…