Last month we saw how powerful the concept of compound interest is. But how do we harness the power of compound interest?
For this, we need to do three things right. First, we need to start investing as early as possible. Second, we need to keep doing this consistently for a reasonable period of time. And finally, we should invest in such a manner that the money grows faster than inflation.
The first and second parts are entirely in your hands. Whether you start early or late in the investment/savings game is entirely up to you. It is not necessary to start with large sums of money. In fact, you can even start with your allowance or pocket money. Instead of spending the money on games, pizza and so on, you can start investing it and watch the money grow. Once you do this for a few months, it becomes a habit to put aside money for investing. It requires discipline, but you will be rewarded with a financially successful life as you grow older.
However, you need to spend a good deal of time and effort to learn how to invest profitably over long periods of time. If you start this early, you would have acquired adequate knowledge to take proper investment decisions by the time you become an adult and join the workforce. Some of the best ways to compound money are (1) by starting a successful business. Most of the richest people in the world and even in our country fall in to this category. People like Dhirubhai Ambani, Bill Gates, Mark Zuckerberg, Narayana Murthy all fall in to this category. (2) by investing in successful businesses. Legendary investor Warren Buffet made his wealth by investing in successful businesses like Coca-Cola. (3) by investing in hard assets like land and property, silver, gold and so on. A number of households in India are quite rich just by investing in hard assets, especially in gold and land.
Young World Money-Wizards Quiz #10
Do you know that Indian citizens can invest in foreign listed companies now? When you think of Apple Inc. what comes to mind? A company that makes you spend a lot of money on their cool products like iPad and iPhone? Well, do you know that Apple is a great company that is also an awesome investment? Do a web search and find out the price of the Apple share ( you can use Yahoo! Finance) on the day of the release of the first iPhone. What is the price of the same Apple share on the day of this column? How much money could you have made by buying just one share of Apple on the day of release of the iPhone?
If you know the answers, email your answers to youngworld@money-wizards.com. The first four correct answers and the most articulate answer within seven days will each be awarded flipkart evouchers worth Rs. 250. The results and the answers will be published on www.money-wizards.com.
Money Trivia : Go for gold!
Indian households are street smart and gold forms a substantial part of the household wealth in India. While gold does not pay any interest, unlike bank deposits, it is a great store of value and is a solid protection against inflationary forces. India remains the world's largest importer of gold, year after year, as increasingly more and more families invest their savings in gold.
About Money-Wizards: A company in financial literacy and money education. They conduct workshops and after school classes on money education for school children. If you want Money Wizards programmes in your school or neighbourhood, write to Info@Money-Wizards.com
