At 20, time is your biggest asset and starting early pays off handsomely. Like Einstein said, “Compounding is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Ask anyone in their 50s, they are more likely to tell you that they wished they had started early. Starting early creates momentum like a huge snowball that becomes an unstoppable force.
Your wealth works the exact same way. The work you need to do in the beginning is often very painful and tiring. But once your wealth snowball is built, then your wealth naturally attracts more wealth. Then the power of compounding interest can work in your favour.
The most common excuse among young people is that they don’t have enough to save and invest. Guess what, if you start at 20, even a small monthly investment of Rs. 5,000/- can get you close to Rs. 5,00,00,000/- by the time you are 60 at annual rate of 12% returns.
The second most important tip is to practice patience and persistence. Patience stops you from taking unwanted action that comes in the way of compounding and persistently adding investments lets you take advantage of market volatility during your investment horizon. When the markets are down, it is natural for every individual to get into doubt. This is precisely where the skills of patience and persistence come into play. Like Warren Buffet says, ““Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. This strategy has helped many investors take advantage of market corrections by increasing equity allocations when the market valuations are cheap.
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