It’s good to have financial goals and aspire to grow your money with prudent investing. However, some people set lofty expectations that require a miracle to pull off consistently.
One Redditor turned to the personal finance community with a pretty challenging request. The individual wants to earn $2,000 per month from a $50,000 emergency fund. That’s a lofty return since the Redditor is expecting to turn their $50,000 into $74,000 by the end of the year.
The comments on this post, plus the Redditor’s responses to these comments, offer valuable lessons for investors.
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Almost every comment pointed out how unrealistic it is to generate $2,000 per month from a $50,000 emergency fund. Furthermore, the Redditor stated that they are okay with “a moderate level of risk,” which isn’t possible for someone who is seeking that type of return.
Dividend stocks and real estate will not produce those types of returns right away. It usually involves many years, if not decades, of consistent investing to generate $2,000 per month. One Redditor suggested $150 to $200 per month as a more reasonable return.
The original poster doubled down on their goal in the comments instead of accepting that the goal may be a bit farfetched.
“If I were to take some calculated risk, do you have any recommendations,” the original poster responded to one of the comments.
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It’s nice to have big goals, but you also have to look at historical numbers to see if they are possible. For instance, the market tends to generate an annualized 8% to 10% return. That means the Redditor will have to take some big risks to end up with the necessary 48% return to generate $2,000 per month. However, it seems like the Redditor wants to take those types of risks at the expense of long-term goals.
“Would it make sense to take out, say, $10,000 from the $50,000 and explore options trading with just that portion?” the original poster asked another commenter. Multiple commenters emphatically told the original poster not to explore options. Options trading is risky already, but it’s even riskier if you don’t know what you are doing.
