Be friends with time
Time can be our best friend or our worst enemy. It will be like a thief, slipping away without you noticing. When it disappears, it leaves no trace.
How to use time is the first lesson we learn about investing. You can't create more time or store it, you can only make the most of it. The way you use time determines whether it is your friend or your enemy.
The magic of compound interest
The following examples illustrate the magic of compound interest and why you should start investing early.
Investor A: Start investing US$300 (HK$2,330) per month at the age of 25
Investor B: Start investing US$300 (HK$2,330) per month at the age of 35
Investor C: Starting at the age of 40, invest US$600 (HK$4,660) per month
Assuming that the annual interest rate is 5%, at the retirement age of 65, the accounts of these three investors will have the following results:
It can be seen from the figure that although investors A and B invested the same amount, the return of investor A who started investing at the age of 25 was significantly higher than that of investor B who started investing 5 years later. It is worth noting that even if investor C invests twice the amount of the former, his return will still not exceed that of investor A who started investing at the age of 25. This is the power of compound interest and the effect of starting investing young.
Investor A's return is twice his initial investment.
Investor B starts investing five years later, and his return is less than half of Investor A's.
Although Investor C is trying hard to catch up, its total return is still far less than that of Investor A.
Investors A, B and C, which one do you want to be?
In fact, Investor A did nothing special. He just started investing early. And you, like him, can start investing early and earn the benefits of compound interest!
How to get started? Five steps to start investing for the long term!
Step One: Start Saving
Emma is 25 years old. She graduated when she was 22 and has been working for 3 years. Her monthly salary after tax is US$2,500 (HK$19,500). Since she has been working for 3 years, she saves US$300 (HK$2,336) every month. By the age of 25, she had US$10,800 (HK$84,080) invested.
Saving money and building an investment fund is the first step to investing! Global billionaire Warren Buffett once said “Don’t save money after you spend it, save money and then spend it.”
Step 2: Open a trust account
The trust account forms an integrated account and is highly protected by the international Hague Convention and Hong Kong Trust Law. It is highly private and avoids freezing of funds, making it more powerful and reliable than a bank account. With a trust account, you can invest in global markets and gain access to 24/7 global investment opportunities.
When the size of your investment continues to grow over the next 10/20/30 years, the importance of capital protection cannot be ignored. Through trust accounts, in addition to obtaining a high degree of privacy and ensuring that investment funds are not easily frozen, you can transfer investment income to offshore accounts with one click on the platform for additional protection.
Step 3: Choose a quality company
After setting up a trust account, it's time to research and choose the right companies to invest in. Please click here and we have selected for you 100 US stocks that are still rising steadily after the 2008 financial crisis or the 2020 new crown epidemic.
Step 4: Buy stocks
Choosing the right company can take some time. When it comes to quality stocks, there is no such thing as the best time to buy. Stay confident and hold on to it for at least five years.
Step 5: Review your portfolio
Regularly evaluate the public companies in your portfolio. Has the company's business model changed? Is their business threatened by competitors in the market? Are they performing as expected? Can the company adapt to the future and sustain growth? You may need to continually revise your portfolio.
Key takeaways
- The earlier you start investing, the stronger the compounding effect will be.
- For long-term investing and long-term wealth planning, a trust account is a powerful financial management tool.
If you are interested in learning more, please contact me:
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The content of this article is purely the author's personal opinion and does not represent the position of 852FIN.
852FIN reminds readers that the content contained in this article mainly comes from online public information and does not constitute any professional advice. Readers should seek professional advice if they have specific questions about the establishment and management of trusts.
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The content of this article is for reference only and does not constitute investment advice or an invitation, solicitation or recommendation for any investment product. Readers are advised to make their own judgment and seek professional advice.
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