Investing in ETFs instead of cigarettes: Financial gains from quitting smoking
On World No Tobacco Day, a calculation reveals a compelling financial incentive for those who quit smoking: the potential to amass a substantial fortune. According to a model by comparison portal Verivox, an individual who saves the money spent on cigarettes each day and invests it wisely in an ETF could accumulate over half a million euros in just 30 years.
To illustrate, a pack of 20 cigarettes currently costs 8.70 euros in Germany. For someone who smokes a pack daily, the yearly expenses would amount to 37,600 euros after a decade and 169,000 euros by the end of three decades, assuming a 3.7% annual price increase. In contrast, an individual who quits smoking and invests the saved funds in an ETF based on the global MSCI World stock index could amass a portfolio value of 502,712 euros in 30 years, assuming a 7.5% average annual return and an annual investment increase in line with the rise in cigarette prices.
The power of compounding significantly contributes to the growth of the former smoker's portfolio over time. After ten years of saving and investing, the portfolio value would already be approximately 54,000 euros, with practically 70% coming from the saver's contributions and the remaining 30% coming from returns. After 30 years, the portfolio value would be around 503,000 euros, with only 34% coming from the saver's contributions and the rest from returns and the compound effect.
It's essential to note that the actual value may vary, and taxes would cut a portion of the gains. However, the remaining sum could still be quite substantial. It's crucial to remember that stock markets can fluctuate, and investors should maintain their investments for the long term to maximize their returns.
While the financial rewards of quitting smoking are significant, it's important not to overlook the health benefits as well. For those interested in quitting, RTL will broadcast the show "Finally Non-Smoker!" with Wolfram Kons, Lilly Becker, and Christian Häckl on Saturday, May 31, 2025, at 12:30 PM.
Sources: ntv.de, awi/dpa
When considering both smoking expenses and ETF investments over a 30-year period, it's worth looking at each aspect separately.
Investing in an ETF offers several advantages, including the compounding effects due to low expense ratios and automatic dividend reinvestment, which maximizes returns. Potential annual returns can vary based on the specific ETF chosen and market conditions, but investing a substantial amount over a long period can yield significant returns.
On the other hand, the cost of smoking over three decades can amount to a substantial sum. Redirecting these expenses towards investments could lead to substantial financial benefits in the long run.
In conclusion, quitting smoking not only offers health benefits but financial incentives as well. By investing the savings from cigarettes in an ETF, individuals can take advantage of the long-term growth potential and the power of compounding, ultimately leading to a substantial fortune.
- In the context of long-term financial planning, it's worth evaluating both the expenses incurred from smoking and the potential returns from investing in an ETF.
- Vocational training, such as understanding the intricacies of investment markets, could be a critical skill for individuals aiming to optimize their personal-finance strategies, especially when considering investing in ETFs.
- Investing in an ETF, given its low expense ratios and automatic dividend reinvestment, can provide substantial returns over time, making it a viable option to consider for health-and-wellness enthusiasts looking to redirect their savings from smoking costs towards investing.
