I’d like to continue our video series that discusses superpowers that all investors can possess.
And the second super power is a Long time horizon: People procrastinate when it comes to savings. This is a grave mistake. One of the most important assets in successful investing is time. This is why it always makes sense to start saving when you earn your first paycheck. Remember, compound interest is the interest earning on the initial amount as well as on the interest that has been added over time. It’s essentially “interest on interest,” which leads to exponential growth of the initial investment. If you start saving from your very first job until you retire, that is more than four decades of compound interest. For example, if you save $5,000 a year, growing at 8% a year for the next 45 years, your $225,000 in aggregate deposits will be worth over $2.2 million dollars in retirement. This isn’t magic. It’s simply math.
There are many expenses associated with living a frum lifestyle. However, this should not stop you from saving something every year. Even a modest sum, if invested early and consistently, adds up by compounding over a longer period, resulting in a significantly larger nest egg. The longer you wait, the more difficult it becomes to accumulate wealth, since compounding has a shorter time frame to work its magic.
In the next video, I will discuss one final superpowers that investors possess.