4 Essential Tips for Becoming a Savvy Long-Term Investor
If you're investing, your focus should be on the long term. There are no guarantees in investing, and there's always risk involved, but there are strategies savvy investors use that reduce risk and increase the chance for financial success. Here are four essential tips for becoming a savvy investor.
Very few forces in finance are as powerful as compounding. When dealing with debt, it can add insult to injury, but in investing, compounding can be credited with a lot of wealth creation. It's great to earn a return on your investments, but it's even better when that reinvested money earns a return itself. When you begin to understand the power of compounding, you begin to understand why starting to invest early and letting time work its magic is one of the best things you can do.
Imagine that you made a one-time $10,000 investment that returns 8% annually. Without investing another penny, your investment would have accumulated to over $68,000 in 25 years. Even if you made $500 monthly contributions to the same investment for 25 years, you would have accumulated over $438,000 while only personally contributing $150,000. Compounding rewards investors for being patient.
Source Fool.com
