Why investing for the long-term is vital to building wealth

Julie Brownlee, Fsp Invest, 28 Jan. 2015

Tags: investing, long-term investing, how to make money in the stock market, compounding, building wealth,

When you invest in the stock market, whether in shares or funds, it can be a scary ride. The market can take dips along the way.

These market dips can lead many investors to bail out of the market as fear gets the better of them. But that’s exactly what you shouldn’t do. It affects your wealth over the long-term.

Let’s take a closer look…

If you invest in the stock market, you care about how it performs

If you have a lot of money invested in the stock market, it’s natural to pay attention to how the market performs. Along with watching the market, reading financial headlines can leave you running straight to the sell button.

Reading about predictions of doom and gloom, and stock market crashes can result in you making mistakes when it comes to your investments.

Of course, markets do crash. You just have to look at what’s happened to the oil price over the past six or seven months. And then there’s the financial crisis.

But what you should remember is these events are rare, Marc Lichtenfeld in Investment U explains.

Instead, you should think about the positives of investing and what it can do for your wealth…

The power of compounding on growing your wealth

Let’s say you start off with R10,000, which earns a market average of 8% each year.

In ten years, that amount more than doubles if you leave it alone. After 15 years, it more than triples to R31,721. After 20 years, it’s worth R46,609. In 25 years, R68,484. And after 30 years, it’s worth R100,626. That’s a gain of over 1,000%.

From this example, you’ll notice that the longer you leave your money be, the more money you make as each year passes. That’s the power of compounding.

Compounding means you make more money every year than the year before, even though the rate of growth remains the same.

And this is why it’s so crucial to invest for the long-term. Try to avoid pessimism getting in the way of growing your wealth.

One of the most important factors to building wealth is how long you invest for. Not jumping in and out of the market.

So there you have it, why investing for the long-term is vital to building wealth.

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