How Much Do You Really Make From The Stock Market?


The financial information in this article is general only, I am not a qualified financial advisor, please speak to a qualified financial advisor before making a financial decision.

It is well known that the stock market has returned around 8% per year. I believe this is because the stocks go up with inflation of around 3% per year and then the stocks pay a dividend of around 5% per year.

Many people make the mistake of thinking they are getting an 8% return. “Wow so if I invest $10,000 I make $800!? That’s good!”

But in fact because everything else went up by inflation that year the purchasing power of that $800 has gone down because of inflation so the part you actually made is the 5% so $500.

“Hey that’s still good, $10,000 is $500 and $100,000 is $5000!”

But here’s the thing, taxes, in this example let’s keep it simple and say the tax on the $500 if you invested $10,000 is $200 then you clear $300 so really you are getting a 3% return after inflation.

Now of course this is a simple example and different people will get different returns and pay different amounts in taxes based on their situation and country but you get the idea.

Investing is not where you make a lot of money after tax unless you have a lot of money invested.

Even if you had $100,000 invested you only make $3000 per year really.

And this is the same for investment properties. Let’s say you have a $200,000 property owned in cash so no mortgage and it’s rented out.

You get the 3% inflation growth per year which you don’t count and then the 5% rental yield.

So 10,000 per year. then the taxes and it’s like $6000 per year. Not much.

This is why it takes a long time to get rich from investing alone if you don’t have a high income to begin with from your career and/or business.

A lot of rich people first make their money from their high income career and/or business, invest back into that to get many multiples in returns on that money and once they have extra money they invest it.

When they do it this way, that $10,000 or $100,000 reinvested back into their education or growing their business doesn’t just return 8%, it may return 50%, 100% or even 1000%++.

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