Why investing early is key to building long-term Wealth
Start early: Investing, Financial Literacy, and Smart Money Management can set you up for long-term financial success.
Welcome to Wise Wealth. Today, we’ll discuss a topic that's crucial to build long-term wealth: investing early. Even if you don't have a lot of money, developing good financial habits now will set you up for success later on. In this blog, we'll explore why investing early is so important and how you can get started. So let’s start with today’s topic.
What is the importance of investing for financial success?
Investing can be a confusing topic for many people, and it's easy to feel overwhelmed by the complexities of the financial markets. However, it's important to remember that investing is not just for professionals or experts – anyone can learn to invest and build a portfolio that suits their goals and risk tolerance.
As a young investor, you have to take an important step towards securing your financial future by starting to invest at a young age. Starting early gives you a longer time horizon to let your investments grow and compound over time. There is a golden rule – the longer you are in the market, the greater your potential returns.
FOR EXAMPLE:
A 20-year-old who invests $375 per month for 10 years in an account with an annual return of 8% can have a portfolio worth over 900,000 thousand dollars by the time they reach 65 years old.
He only has to invest for 10 years and then let money grow for 35 years without putting any more MONEY!
On the other hand, a 30-year-old who invests the same amount and has the same annual return, but invests for 30 years (he needs to continue investing for 30 years), will have a portfolio worth about $800,000 at age 65.
Starting early to invest and taking advantage of the power of compounding interest is the key to have a successful portfolio. The 10-year difference in investment periods between the two scenarios can result in a difference of hundreds of thousands of dollars in portfolio value. It is never too early to start investing and letting your money work for you.
As Albert Einstein used to say: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it”.
As a tool, here is a useful link that is going help you calculate how much your money can grow with the power of the compound interest. Not only that, it will also demonstrate how time can work its magic in investing, which is crucial for victory.
If you what to go deeper in this topic I highly recommend you the read the Compound Effect by Darren Hardy that talks about how small steps can lead to big things. You just have to take the first step.
Some people are going to say “I don’t have the money” or “it is too difficult”. Those are just excuses. You can start putting your money to work. It doesn’t matter if you start with 10 dollars or 100 dollars what matters is to build those wealth habits of savings and to invest since a young age.
Most people in their 20´s don’t worry about building wealth and generating those habits that are going to help them be successful with their finances, and in my point of view that is a huge mistake, because in your 20´s it is when you should do the hard work and create a good diversified investments strategy that could set you up for financial success.
Here is an article from Bankrate. It discusses the financial knowledge and habits that many young adults wish they had acquired earlier in life. The article is based on a survey of 1,000 American adults ages 18-29.
In conclusion, investing early is a crucial step towards building long-term wealth and securing a stable financial future. While the complexities of the financial markets can be intimidating, it's important to remember that anyone can learn to invest and create a portfolio that suits their goals and risk tolerance. The power of time in the market is significant, and the earlier you start investing, the more time your investments have to grow and compound. As the examples have shown, even a relatively small investment over a shorter period of time can lead to significant portfolio growth. So don't wait, start investing early and let your money work for you to create WEALTH FOR THE LONG TERM.
And remember: "Building wealth takes time and discipline, but the rewards are well worth the effort."
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