£1,000,000 now or £10,000/month for 10 years?

[arknor]

Inflation isn't relevant for this comparison it affects both of them across the same 10 year period. You're interested in the returns you get from either.

10k in 10 years won't have the same buying power as 10k now though so you lose a lot of the money to inflation if you don't take the lump sum guaranteed.
£10000 in 2010 is worth £13,112.60 in 2020

10k over 10 years is 1.2mil? and inflation is expected to be higher than the last 10 years. 3.5% right now? I think

rather have the 1mil and try to beat inflation which probably isn't that hard and you could probably hit close to 10k in dividends a month within a 10 year period if you really wanted too

 

[GSXR Gaz Mc]

take the million now

u may die next week

 

[dowie]

10k in 10 years won't have the same buying power as 10k now though so you lose a lot of the money to inflation if you don't take the lump sum guaranteed.
£10000 in 2010 is worth £13,112.60 in 2020

You don't know that for sure, inflation isn't always positive, but it doesn't matter because it applies to both.

10k over 10 years is 1.2mil? and inflation is expected to be higher than the last 10 years. 3.5% right now? I think

rather have the 1mil and try to beat inflation which probably isn't that hard and you could probably hit close to 10k in dividends a month within a 10 year period if you really wanted too

That's the important part, what you'll be investing in...

Inflation is irrelevant, it is exactly the same rate either way - we're looking at the same 10 year period, the same rate of inflation, there is nothing to compare, it's literally identical.

if you invest 1 million now and get a return from that across 10 years then just compare to the future cashflows. In 10 years time your investment decisions with either have been exposed to the same rate of inflation, the only comparison needed is between the actual investment decisions themsevles.

 

[arknor]

but your getting 10k a month not 10k+ inflation? and the extra you get for being drip fed likely won't come cose to meeting inflation.

you really think we will have negative inflation anytime soon? I thought the general consensus was inflation will get worse.

doesnt even seem like it properly caught up with all the money printing during covid.

I guess for most people they wouldn't be able to resist spending the 1mil, but personally I would barely touch any of it and add to my diverse portfolio of stocks (maybe not so much in the current market though)

still rocking a 4670k and 980TI even when I could go buy a new PC right now. that's how frugal I am

 

[dowie]

but your getting 10k a month not 10k+ inflation? and the extra you get for being drip fed likely won't come cose to meeting inflation.

you really think we will have negative inflation anytime soon? I thought the general consensus was inflation will get worse.

No, I'm not taking a view on inflation at all, I'm just pointing out that it isn't relevant either way. Inflation will exist in either scenario at exactly the same rate so there is nothing to compare there, if you're planning on investing the 1 million then you only need compare that with investing the future cashflows...

Whatever net result you end up with in 10 years time the rate of inflation is the same and (if positive) will have made £1 worth relatively less in exactly the same way... the only comparison you need make is between the two results.

 

[Azza]

£1m.

Stick it in an index fund, withdraw 3% or 4% per year.

 

[potatolord]

Take £1m now, buy a load of graphics cards and scalp them on ebay.

*stands well back*

 

[silversurfer]

10k over 10 years is 1.2mil? and inflation is expected to be higher than the last 10 years. 3.5% right now? I think

the 10k a month is very likely going to be less even if inflation was only averaging 3.5% I wouldnt take it. 120k would be 85k end of the decade when its still being paid out nominally but less value

 

[dowie]

the 10k a month is very likely going to be less even if inflation was only averaging 3.5% I wouldnt take it. 120k would be 85k end of the decade when its still being paid out nominally but less value

What do you think happens to the lump sum in 10 years time due to inflation?

It doesn't magically cease to exist for one option and not the other, it's exactly the same rate of inflation, the same universe regardless of this one choice you make. The only difference here is your choice and what you invest it in - you can simply make the direct comparison by either looking at the NPV right now of the future cashflows vs the lump sum or considering the estimated returns from investing either and what that would be worth in 10 years time (or indeed NPV of that today with a discount rate based on the estimated return).

Inflation is irrelevant to the NPV in the first case and in the second case, where you're looking at what you'd have in 10 years time then both results are subject to the same 10 years of inflation, that a £ is likely worth less in the future isn't relevant as it is still worth the same(lesser) amount, in 10 years time, in either scenario.

If you have some scenario where you end up, in 10 years, with say 1.5 million with one choice and 1.4 million with the other choice that's all you need to compare... That £1.5 million or £1.4 million is worth relatively less (say) in 10 years time isn't relevant as that's the case in both scenarios, each £ is worth less to exactly the same extent in either scenario so it's irrelevant.

 

[arknor]

your not holding the 1million in a bank account for 10 years doing nothing.

I don't get how you think inflation effects them both the same.

it only does that if you sit on the 1mil

Tell you what I'm buying 1mil of intel right now (but not really) (I'm pumping the 24k dividend each year back in too)
bump the post in 10 years.

then compare it with buying 10k intel shares every month for 10 years

 

[dowie]

your not holding the 1million in a bank account for 10 years doing nothing.

I don't get how you think inflation effects them both the same.

Because it literally does - you're talking about the same universe, same time period... what has changed with regards to inflation? Why would the rate of inflation be different in the universe where you pick the lump sum vs picking the monthly payments?

it only does that if you sit on the 1mil

Nope, whatever you do has absolutely no impact on the rate of inflation. The effect of inflation on the relative worth of £1 in 10 years time, in either scenario, is literally identical, your tiny choices here has no substantial impact on it.

It doesn't matter whether you invest that 1 million in the stock market or stick it in the bank, it's a drop in the ocean, the inflation rate is literally the same.

Tell you what I'm buying 1mil of intel right now (but not really)
bump the post in 10 years.

then compare it with buying 10k intel shares every month for 10 years

What does that have to do with the overall rate of inflation?

I think you're nearly getting it here - see what you're comparing there is the result of the two investments right? Why do you need to look at inflation? In 10 years time the result of doing that will give you an amount in £s for either choice... those amounts can be compared directly.

It's utterly irrelevant whether the rate of inflation was 2% or 3% or 0%... all that is of interest is how many £s you have in 10 years from scenario A vs scenario B.

If you think otherwise then explain why £1 in 10 years' time is worth a different amount in one scenario than the other or why the rate of inflation is going to be different in one scenario or the other?

 

[arknor]

the fact is if you have the money to invest you can beat inflation.
if you have 10k a month you can't.

yea inflation effects them the same, but in reality it doesnt because your money is growing with inflation rather than losing to it

 

[dowie]

the fact is if you have the money to invest you can beat inflation.
if you have 10k a month you can't.

Not true, depends on the return from your investments and what the rate of inflation is over the years.. but again it's irrelevant for the purposes of comparison between the two as it applies equally in either scenario.

yea inflation effects them the same, but in reality it doesnt because your money is growing with inflation rather than losing to it

No not necessarily, it could lose out to inflation in either scenario, it's utterly irrelevant when comparing the two. Again if you don't believe me then answer the previous questions or show me where it applies here?

All you need to do is compare the returns of your investments in each scenario, what does that have to do with inflation?

You have some results for scenario A and some results for scenario B, where does inflation come in there?

For example - let's say you project you'll end up with 1.4 million from one scenario and 1.3 million from another scenario based on some assumed return - what relevance does inflation have to that comparison? Where does it come into the calculation?

The fact is each resulting £1 in scenario A and each resulting £1 in scenario B, in 10 years time, are affected in exactly the same way, they're each worth £X amount relative to £1 today, so what relevance does inflation have here?

 

[arknor]

pick a stock you might have bought 10 years ago

apple fanboy perhaps? your first 10k would buy you shares at 10$ a share, your last 10k would have been paying like 150$.
at the end of the 10 year period you would have owned way less stock, got way less value for money and your last 10k is essentially 70% of it's actual value anyway

intel? amd? nvda? google? amazon? facebook? netflix? there's almost 0 companies where you would have been better of not investing the whole whack 10 years ago

if your some love island type who would have invested in the high street then I'm sure that's quite different.
taking 10k a month just seems like tieing your hands behind your back.


the only point of it being an option is really for the types who have no self control and would fritter the whole lot on tat

 

[dowie]

pick a stock you might have bought 10 years ago

apple fanboy perhaps? your first 10k would buy you shares at 10$ a share, your last 10k would have been paying like 150$.
at the end of the 10 year period you would have owned way less stock, got way less value for money and your last 10k is essentially 70% of it's actual value anyway

intel? amd? nvda? google? amazon? facebook? netflix? there's almost 0 companies where you would have been better of not investing the whole whack 10 years ago

Come on, at least read the previous replies and engage with it else this is pointless, you're not even arguing against anything objected to there...

The argument wasn't against the idea that you could make more money from taking on more risk with the lump sum, that's kind of obvious. What does that have to do with inflation though, what relevance does inflation have to the comparison between your returns from investing in X stock now vs investing in X stock periodically over 10 years given some assumed return from that investment?

Please go ahead and show where it comes into that calculation?

I mean I'm kind of repeating myself here but you didn't pay attention previously - you're going to estimate you make X amount from investing in ABC plc or CDE index tracker right? And you're going to estimate you make Y amount from investing periodically over the same 10 year period from investing in ABC plc or CDE index tracker right?

Inflation has no relevance to that comparison!

That's the point, you can directly compare £Xs and £Ys, they're the two results in 10 years' time, the effect of inflation on each £ for each of those results in 10 years is literally identical, it doesn't matter whether it is 3% or 5% or -1% it is is utterly irrelevant.

If you think otherwise then address that point, show where it is relevant.

 

[Changesx]

I’d take the 1 million and invest it, and hopefully make enough money in passive income. Or id put 1 million on black at the casino. Maybe it’ll be the best decision in my life or I’ll live to regret it jokes I’d definitely invest the money into something though!

 

[Arsonist]

Take the 1m.
Splurge on holidays, cars, women and the finer things in life. Buy a massive house and supercar.
Run out of cash in 2-3 years, but know that I lived the best 3 years of my life.
Carry on with previous life but with nice home and car fully paid off. Probably sell nice car and get something cheaper to run.

 

[dowie]

I don’t think you’d be able to buy a massive house if you also intend to buy a super car and spend large sums of money on fancy holidays, “finer things in life” etc…

I guess 1 million isn’t actually all that much these days.

Like a super car could cost you £150k or so, let alone cars (plural) like if you also buy a decent german car as your daily one.

Holidays could run into 5 figures if you’re flying business class, staying in good hotels. Living it up for 3 years is going to eat a big chunk too.

Might only have say 500k left for a house if you want say a super car + new BMW + 3 years worth of nice holidays, expensive restaurants etc…

500k is maybe enough for a modest 4 bedroom detached house in the Midlands.

 

[robcat101]

£1m in the early 60s equates to over £20m today. That’s why a traditional “millionaire’s” lifestyle costs a lot more than a million quid. Having said that, I wouldn’t turn it down. Still a lot of cash, but if you’re in your 20s with no real assets, you’d be wise to not get too carried away. (I’m in my 50s, so probably could blow a lot if it ).

 

[Django x2]

£10k a month. Isn't that just going to work and having a few days off each month?