What is Investing?
Albert Einstein is report to have said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Whether he did or not is not as relevant as the truth behind this statement.
Rather than boring you with complex equations here is some simple math.
What if I saved $100 each month for 40 years?
Well I would have $1200 each year and $48,000 after 40 years.
However, if I invested that same money how much would I have?
Let’s use a compound interest calculator.
Investing $100 each month for 40 years at 12% interest per year = $1,188,242
That’s right I would have $1 million more!
Are you beginning to see the difference between saving and investing?
Investing means putting your money to work using different investment tools that give a return or interest each year.
I will use the interest rate of 12% on this site as this is what the S&P 500 has historically returned since it’s inception.
Anyone can save $100 per month so I believe everyone has the potential the be a millionaire in 40 years.
Can’t wait that long?
Here is the same calculation done with $1000 over 20 years.
Investing $1000 each month for 20 years at 12% interest per year = $999,147
And what if you continued on for the full 40 years?
Investing $1000 each month for 40 years at 12% interest per year = $11,882,420
That’s right, just by investing $1000 a month you could be worth over $11 million when you retire.
There are 3 types of people reading this right now:
1. You got bored and are now on Facebook.
This is most people.
Most people retire without building wealth or leaving a large inheritance to their kids.
Actually most people in the world live with debt their whole life.
2.You got skeptical
I understand this.
The numbers are so great you should be somewhat skeptical.
But don’t discount good common sense just because there are many ‘snake oil salesman’ in the world.
This is the reason I never really looked into investing until I was almost 30, because I thought it was all a scam.
That was until I decided to learn about some of these principles for myself.
3. You Got Excited
Investing should excite you.
It is the pathway for most people to becoming wealthy.
Some people inherit money, some people build amazing businesses, some people are celebrities or sports people and become millionaires.
But actually they only make up 1% of the population.
Studies show in America that out of the 11 million millionaires 90% obtain their wealth through investing over many years.
You can be one of this people!
There is a lot to understand about investing and this is just a simple overview.
But I hope this has sparked something in you to pursue this more and educate yourself.
If not for yourself than for your family or children or grandchildren one day.