Odds of Becoming A Millionaire
If you are reading this site there is a pretty good chance that you are trying to build wealth. You may have your own goal. But one goal many investors have is to become a millionaire. Sadly, your odds of becoming a millionaire are not all the same. It is highly dependent on your education level, age, and race according to historical data from the U.S. Federal Reserve.
Let’s take a look at this in little more detail. First, let’s outline the number of millionaires in the U.S. Reportedly, there were about 11.8 million millionaires in the U.S. in 2018. This is about 3.6% of the population based on a total population of about 325 million. Of this number 10.23 million have a net worth of at least $1 million to $5 million. Another 1.397 million have a net worth of between $5 million and $25 million. Those with wealth over $25 million included 173,000.
So, it seems pretty straight forward that you have a 3.6% chance of becoming a millionaire, at least in America. This is better than your chance of being struck by lightning in any given year which the National Weather Service estimates as 1 in 1.2 million or 0.000083%. If you live to 80 then your chance of being struck by lightning is 1 in 15,300 or 0.0065%. You are also less likely to win the lottery than become a millionaire. If you play Mega Millions your chances of winning the jackpot is 1 in 302,575,350, which is even lower probability than being struck by lightning.
Let’s examine your odds of becoming a millionaire based on education. In general, education benefits almost everyone from the perspective of becoming wealthy regardless of age. You can clearly see in the chart below that those with more advanced degrees have a higher chance of becoming a millionaire. Clearly, having a Master’s degree more than doubles your odds of becoming a millionaire compared to having no degree or a high school degree. Without any degree though your odds of becoming a millionaire are pretty slim according to the data.
Note that the data does not indicate the field of the different Master’s degrees. Clearly though some Master’s degrees are more valuable than others in their ability to generate higher income in order to build wealth. For example, a Master’s degree in business or computer science may arguably lead to a greater jump in your income when compared to Master’s degree in art or literature.
Overall, higher paying jobs tend to require higher levels of education, so the chart makes sense from that perspective. Doctors, lawyers, financial analysts, scientists, computer scientists, and engineers all tend to earn more. All of these professions tend to require more schooling. There are of course exceptions. Bill Gates, the founder of Microsoft (MSFT), never finished college. Other famous tech company founders such as Mark Zuckerberg of FaceBook (FB), Larry Ellison of Oracle (ORCL), and Michael Dell of Dell Technologies (DELL) did not finish college either. There are others outside of tech who also did not finish college but became millionaires. But as a group these people are often the exception as opposed to the average. I mean can anyone credibly argue that Bill Gates or Mark Zuckerberg would not have finished college if they wanted to. They dropped out of Harvard.
Your odds of becoming or at least being a millionaire in America also varies depending on age. The chart below shows that the older you are the greater your odds of becoming a millionaire. Roughly 61% of millionaires are between the ages of 60 and 79. This makes sense since you have spent most of your working years building wealth.
That said, whether you become a millionaire or not depends on some personal decisions. The educational path and career choice you make are big factors. Someone who works in Silicon Valley at a tech company as a data scientist is much more likely to become a millionaire than someone who works as a janitor. However, Ronald Read, a Secret Dividend Millionaire, would have proved that generality wrong. Whether you rent or purchase your house also is a factor. Homeowners tend to be wealthier. Further, I would argue that if you are frugal, save, and invest early and systematically you are much more likely to become a millionaire.
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Gordon Growth Model – Valuing Stocks Based on Constant Dividend Growth Rate
I updated my article on the Gordon Growth Model with additional examples. Take a look at the article.
Dividend Growth Stock Lists
I updated several of the dividend growth stock lists that I track This includes updated tables of as well as additional commentary.
Coronavirus Dividend Cuts and Suspensions List
I updated my coronavirus dividend cuts and suspensions list this past Wednesday. The number of companies on the list has risen to 393. We are well over 10% of companies that pay dividends having cut or suspended them since the start of the COVID-19 pandemic. The number of companies on the list continues to rise each week.
This past week there was one company added to the list, but I also included 14 companies that I had previously missed. The one new company was Berkshire Hills Bancorp (BHLB).
The 14 companies that I previously missed were Investcorp Credit Management BDC (ICMB), Summit Midstream Partners (SMLP), OFS Capital (OFS), Monroe Capital (MRCC), Medley Capital (MCC), Salem Media Group (SALLM), Rocky Mountain Chocolate Factory (RMCF), Cantel Medical (CMD), Psychmedics (PMD), International Game Technology PLC (IGT), Ituran Location and Control (ITRN), Linamar Corporation (LIMAF), Melco Resorts & Entertainment (MLCO), and PB Logistics LP (PBLX).
Stock Market Volatility – CBOE VIX
The CBOE VIX measuring volatility came down this past week to approximately 26.9 after spiking above 30 last week. It still remains elevated relative to the long-term average. The long-term average is approximately 19 to 20. I continue to believe that volatility being driven by new infections, vaccine developments, federal stimulus, and unemployment numbers.
The number of weekly new unemployment claims were flat with last week at 884,000. We seem to be bouncing around between 800,000 and 1 million for now. But for some perspective, one-year ago weekly unemployment claims were only 208,000. Currently we are 4X the normal level.
The five states with the highest unemployment rates were Hawaii (20.3), Puerto Rico (16.7), Nevada (16.0), New York (14.9), California (14.8).
Fear & Greed Index – Odds of Becoming a Millionaire
I also track the Fear & Greed Index. There are seven indicators in the index. They are Stock Price Breadth, Put and Call Options, Stock Price Strength, Junk Bond Demand, Safe Haven Demand, Market Momentum, and Market Volatility.
The current reading is now at 58, which is in Greed. The index ticked down one point from last week. Note that I have been pointing out that one the index goes over 60 it rarely stays there that long. Further, a value near 80 usually means that it drops fairly fast afterwards, which is exactly what happened.
More of the sub-indices are signaling weaker readings. Stock Price Breadth is at Neutral reflecting the declines of the past two weeks. More stocks are declining now than advancing in the past month. Market Volatility spiked last week but has come down a bit giving a Neutral rating. Bonds are now outperforming stocks by 1.39%, which is signaling Fear. On the other hand, Junk Bond Demand is still strong signaling Extreme Greed. Volume in Put options has lagged call options signaling Greed. Market Momentum and Stock Price Strength remain bullish signaling Greed.
Market Valuation – Odds of Becoming a Millionaire
The S&P 500 is trading at a price-to-earnings ratio of 29.7X and the Schiller P/E Ratio is at about 30.7X. These have come down a full point since last week. This is the second week in a row that these metrics have declined. Note that the long-term mean of these two ratios are 15.8X and 16.7X, respectively. I continue to believe that the market is largely overvalued at this point
There seems to be quite a bit of profit taking in tech stocks. A few stocks are now in correction territory dropping about 10%+ in the past week or two. I am not claiming that these stocks are bargains yet. But the excesses of the Summer months seem to be fading. This has caused some dividend growth stocks to be priced as better deals as the recent market dip has brought many stock prices down. I have personally added to Cisco Systems (CSCO) after the price dropped below $40 per share. The stock is still down about 17% year-to-date and the yield is decent at 3.6%. You can take a look at my recent analysis of Cisco.
S&P 500 PE Ratio
Shiller PE Ratio
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