Mid-Life Dilemma: Top School MBA versus Stock Investment Portfolio [Min Cost = £80,000]

Today I spoke to a collogue at work and found out that he got accepted for the Top Business School in Europe. The Fees for INSEAD Business school is 80,000 Euros which is not including accommodation and travel from his home country. My ambitious and smart colleague is 35 and hoping for a career boost with his MBA. I asked him, why not invest your £80,000 savings in 100% stock portfolio to grow your wealth? Lets break down the figures.

To be able to save £80,000 hard liquid cash in his current career lifetime is a fantastic achievement where many professional are unable to attain. Assuming he has a 10 year career span, it makes an average savings of £8,000 per year. Not asking for too much personal details, the figure might be more.

Adobe Spark copy

He is currently 35 which means he has another good 25-30 years of good career battery left in him before a comfortable retirement.

If this smart future INSEAD MBA graduate invested all his savings into equity stocks smartly with a well balance portfolio, low fees and all dividend reinvestment instead he would have earn the following.

Adobe Spark copy 2

A very very Conservative Conditions:-

  1. £80,000 as initial deposit
  2. Investment portfolio last for 25 years
  3. Yearly Savings addition of £8,000
  4. portfolio growth of a low 6%. (lower than FTSE average Yield)
  5. Average dividend payout of 3%.

screenshot.png

This results in a total of £1,367,453.62 in his bank account at 388% total return all at 6% growth.

screenshot.png

This results in a total of £2,002,143.56 in his bank account at 615.05% total return all at 8% growth (all others remains the same).

screenshot.png

Or he invest all at Warren Buffett’s BRK-B stocks which doest pay a single dividend by historically reaps an average of 16% for the past 4 decades. He could have cash in over £5million.

Lets assume the worse case condition and pick the first very very conservative outcome of £1,367,453.62. The total invested amount is £80,000+(£8000×25) = £280,000. Net profit stands at £1,087,453.62.

Divide that by 25 years the figure is £43,498.14 growth per year.

My response back to my future INSEAD 35 year old MBA collegue is:-

Make sure your salary and bonus Post-MBA is worth it to be able to sustain another additional £43,498.14 savings per year for the next 25 years, then go for it. Remember it is your savings and not your salary which dictates your net wealth!

Life is not all about money but financial freedom. One key strength my colleague has is his ability to save. With his ambitions he will be a very successful as well. We all take risk in life an decision comes in various stages of our life. All the best to him with his MBA.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s