The Single Most Effective Way To Become Wealthy
Despite what you may have heard, you don’t have to be an expert in personal finance in order to become rich. You don’t need to receive a huge amount of income every month. You don’t even have to come from a wealthy family.
For the majority of millionaires, they have gotten to where they are today because they invest. In a Forbes article, it was revealed that 72% of the wealth of millionaires in Singapore is made through personal investments.
And it isn’t difficult to see why.
Suppose you invest just $10 per week:
After five years (assuming an average 8% return), you would have accumulated $3,295, and after 10 years, you would have $8,136. And that comes from simply setting aside slightly over a dollar a day.
Investing $50 a week would result in $16,473 after five years and $40,678 after 10 years. Imagine how much money would accumulate if you set aside a bit more each week, and did that for several years.
What’s more, if you earn $40,000 per year for example, you could potentially be richer than someone who earns $200,000 – by saving and investing more over time.
The Benefits Of Investing Early
Interestingly, if you invest early you could be getting more returns using less capital than if you were to start later.
Let’s illustrate using an example.
Imagine there are 2 individuals David Tan and Peter Lim. Both are age 35 this year and believe in the importance of investing and decide to set aside $300 each month (or $3,600 per year) to invest in a diversified investment fund that yield an average return of 12% every year
The difference between them is that David starts to invest early at age 35 and puts in $3600 yearly into the fund for the next 8 years. Whereas Peter only begins investing 8 years later at the age of 43 and puts in $3600 yearly until the fund matures.
Let’s take a look at what happens to the value of their investments when they both turn 60 years of age.
Believe it or not, David made $156,580.72 more than Peter, despite investing $36000 less in the investment fund!
So how did this happen? Here’s how.
By investing early, your investments have a longer time for the power of compounding to exponentially increase the value of your investments. Therefore, by starting early, you have a huge advantage compared to another investor who begins much later.
Another key take-away from this example, is the longer you wait to get started, the lesser the amount of money you make in the end!
Many of us fail to get started managing and investing our money because we’re intimidated or don’t know where to start. The thing is, investing is not as complicated or daunting as we make it out to be.
In fact, one of the best ways to get started is to simply start educating yourself in investing, one step at a time. A good way to begin is to read investment-related articles on a regular basis. You can source these free articles on a number of websites, including ours.
And of course, if you would like to cut short your learning curve, you could consider attending investment seminars organized by investment veterans.