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Financial Goals

The Investment Strategy that Could Get You to Mars

The privatization of space travel—and the ambition of Elon Musk—means that Mars colonization might be closer than you think. If we’re to believe recent statements on cost, it is a surprisingly accessible goal with the right long-term saving strategy.

Articles by Dan Egan

By Dan Egan
Managing Director of Behavioral Finance & Investing, Betterment  |  Published: June 2, 2017

To achieve your goal of getting to Mars, it’s critical to start early.

For most people, it’s helpful to automate your savings for a large purchase by using automated deposits into an investment account.

Align your large purchase savings goal with other savings priorities to make sure you can realistically meet your objective on time.

The privatization of space travel—and the ambition of Elon Musk—means that Mars colonization might be closer than you think. If we’re to believe recent statements on cost, which Musk has scoped at $200,000, it is, in fact, a surprisingly accessible goal with the right long-term saving strategy.

Musk’s space exploration company, SpaceX, is working to make this $200,000 goal a reality. On March 30, SpaceX made a breakthrough in achieving this vision: It successfully launched and landed the first ever reusable orbital rocket, the Falcon 9. Refurbishing and re-launching rockets is a key part of SpaceX’s plan to make space travel cost-effective.

“I hope you’re all thinking about your tickets to Mars,” SpaceX President Gwynne Shotwell said to Space Symposium attendees a few days after Falcon 9’s launch… which of course gave us a Betterment an idea: How should people be saving and investing if they want a ticket to Mars?

Would You Save for a Mission to Mars?

While my wife isn’t keen on the idea, I am definitely interested in a ticket to Mars—and I might even start saving for one for my 2-year-old daughter—so I figured there had to be a few like-minded Betterment customers already saving for space travel. I had our team look into it, and we found there are, indeed, some space savers in our universe. As of today, more than 20 Betterment goals are for “Mars” or “Space,” with some individuals contributing more than $1,000 each month toward them.

When you set up a goal in Betterment, you can customize what you’re working toward—like saving for retirement, buying a home, or leaving Earth. Betterment then crunches the numbers to suggest a personalized allocation of stocks and bonds based on your time horizon and suggests how much you need to save each month to reach that goal.

If my daughter wants to go to Mars in 30 years, and I start saving today, Betterment calculates that I’d need to save just $218 dollars a month, assuming that Musk’s $200,000 quote is accurate.

Even if you’re not trying to go to Mars—and I wouldn’t blame you—it’s great to set and achieve significant financial milestones with a goals-based investment strategy. Here’s how to help maximize your chance of reaching your ambitions, whether it’s space-related or not…

1. Start early.

Returns compound over time, so the earlier you start saving for a goal, the less you’ll have to save. Investing in the market is likely to help grow your savings—and the more time you give it, the more it works for you. Goal-based wealth management forces you to identify and save for these goals in advance.

Here’s an example of the monthly savings needed to get to $200,000, depending on whether a person starts saving 5, 10, 15, or 20 years in advance. For those who start saving 30 years out, monthly savings needed may be as low as $218 per month. If you wait until you only have five years to save, you’ll have to put away significantly more each month: $3,050.

Time to Save Monthly Saving Amount
5 year $3,050
10 years $1,318
15 years $747
20 years $472

These values are examples. You can calculate this advice in your Betterment account to figure out how much you need to save each week or each month to hit your goal.

2. Automate your savings.

For most of us, it’s more practical to invest incrementally, rather than depositing all of our savings at once. Automating this process makes it easier to save the right amount every month, budget effectively, and make sure your money has the maximal time to generate returns.

Betterment’s cash analysis tool helps you put your excess money to work. Put another way, it gives you the option to set parameters that directs excess money that exceeds your short-term budget from your checking account into Betterment to help ensure you’re maximizing your long-term cash return. Regular auto-deposits also provide an opportunity for practices like rebalancing and tax-loss harvesting that can help improve your returns and lower your tax bill, respectively.

This type of investment strategy is a form of dollar-cost averaging, which is the practice of regularly investing a fixed amount regardless of what’s happening in the market. By investing on a set schedule, you avoid the impossible task of trying to time the market and lower your exposure to risk.

3. Be realistic about the time horizon.

Plan far in advance, being honest with yourself about how much you can save on an ongoing basis. A goal-based approach matches your time horizon to your asset allocation, which means your risk is adjusted based on how long you have to achieve your goal.

Space travel is one of many long-term financial goals Betterment users are saving toward. Some people have something specific in mind— whether it’s their dream wedding or college tuition for their kids. Others are using Betterment to save for retirement or to build wealth. Based on the type of goal, we factor in the time horizon, the amount of your initial deposit, and the frequency of scheduled auto-deposits to calculate your asset allocation over time.

Below is an example of recommended stock allocation for a major savings goal, which could be an interplanetary trip or a down payment on a house. It starts with a high equity allocation when you’re further out and can afford more risk. Over time, this allocation gradually becomes more conservative. As you can see below, we keep at least half of the portfolio in stocks until you’re about five years from your goal.

Major Purchase Advice

If you’re saving for Mars, the good news is that you have time to save. Musk is optimistically estimating the first mission will happen in 10 years.

No matter what you’re saving for, a goal-based investment strategy can help you get there. We think of it as a better version of the envelope system—a way to encourage good savings habits while more precisely managing your wealth.

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