How to be a millionaire – the miracle of compound interest and long-term savings

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Becoming wealthy and becoming financially free requires more than just saving. You also need to invest.  The big secret to investing is – ta da – start now.  This is illustrated in a guest post that I am bringing to you today by US blogger Andrew Altman from SlickBucks.com that highlights the magic of compound interest.

“Investing is the best way for you to change your financial future. Many people who want to start investing are unsure of how to get started. With changes going on in the economy today investing might seem daunting, but now is a great time to find investments that interest you.

The reason that investing is so powerful is compound interest.  Compound interest turns a seemingly small investment into something really large with enough time. The earlier that you start investing, the better your financial position in the future.d

The Power of Compounding – how to be a millionaire by the age 65

Compound interest is one of the most important things for anyone to understand in investing. With all of the options today, there are a lot of things that you can do to invest for the future.

Instead of worrying about what to invest in, instead spend your time thinking of ways to increase your income to invest more. If you start investing in your 20’s, you can easily accumulate millions of dollars by the time you retire. At a conservative rate of return, $500 per month will result in over one million dollars by the time you reach the age of 65.

With that being said, you need to pick investments that are going to yield what the market has historically returned. The easiest way to do this is to pick an index fund that tracks the market.

Personal Finance

There are many reasons why people never build wealth through investing. One of the biggest is that they spend all of their cash on expenses and debt every month. If you have a lot of debt, you are not going to be able to have extra money to invest with. This is going to impact how much you can accumulate.

Many young people today wrongly assume that they can wait for years before they start investing and still have success. With compound interest, a ten-year difference in when you start investing is going to have huge implications on how much you accumulate.

The best advice for anyone on investing is to start today. Even if you feel like you have a small amount of money coming in, you can still have financial success if you start early and stay with the plan.

Investment Options

There are many investment options to choose. One of the simplest ways to get started investing is through the stock market. Stock market investing is perhaps conceptually the easiest way for someone to invest in because the concept of investing in companies is fairly straightforward. There are plenty of investment funds that you can choose from that allow you to select one suitable to your goals. If you want to get started investing in stocks directly, you can start an online account and start trading within minutes.  There is no longer a requirement that you hire a stock broker to trade in shares for you.

If you do choose to invest in the stock market, you need to have a plan in place before you begin. Would you prefer to make short-term investments and quick day-trading or you are thinking of investing for the long run? Your preference will determine the particular approach you have to take. In all cases though, it’s important to establish your “Stop Loss” and “Take Profit” limits, otherwise, you risk with imploding your account. Even outside of stock investing it’s crucial to have a solid plan before you jump into action. Luckily, nowadays there are hundreds of online resources that discuss different investment strategies and help you with planning.

Market Risk

With any investment, there are going to be times when you make money and times when you lose money. The stock market will have years when everything is down and you lose a lot of money.

If you want to build wealth, you have to be willing to stay in the market when things are going bad. It is not easy to keep your money in, but it is the best financial decision over time.

Time and again it has been proven that investors who stay consistent have the most success. You cannot try to time the market and have success with your investing. Instead, you need to make sure you are thinking about the future implications of your investing decisions.”

Andrew Altman is the editor-in-chief of a site SlickBucks.com, which aspires to help people on their road to better financial wealth. For that, SlickBucks features informative articles about investing and saving so everyone could achieve the type of wealth they desire.

How old were you when you first started investing?  What advice do you have to give to someone who is just starting out

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