Learning Resources
Hot Search | VI Learning Resources | VI
Hot Search

02 Aug 2021

Yes, Investing Will Make You Rich!

Investing will make you rich | VI
(c) Sadie Xiao

Let’s not argue about how many people agree and disagree that investing makes you rich. People have their own biases when it comes to money-making. In this article, we’ll look at this objectively.

How can investing make you wealthy? Specifically, let’s answer the question: Will investing in stocks help you become rich/richer?

The answer to both is a resounding YES!

Investing will make you rich

Think about this. Why are the world’s richest people rich? And even in a pandemic, when people lose jobs, economies are down, and the overall outlook is negative, why is the number of millionaires growing?

It’s simple – they invest.

Take it from Amazon’s Jeff Bezos. He’s one of the world’s wealthiest CEOs not because of his salary (he actually gets the same salary for the past two decades) but because of his shares in the company. Owning 57 million shares in an extremely high-performing company made Bezos billions whenever the share price increases. Remember when Amazon’s stock price shoot up to around 19% in 2019? Bezos made approximately $12 billion more in less than a day. And yes, it’s because of investing in stocks.

But maybe you’ll say Bezos is a different story altogether. Fine, let’s take yourself as an example then.

We don’t know what you’ve been doing in 2002, but if at that time, you’ve invested in Netflix (share price was at $15), you could’ve been enjoying the returns of your investment. Currently, a Netflix stock is priced at $517.

You might not be Bezos but you could be an investor at Amazon. Imagine you’ve invested $1,000 in the company in 2011. Now that Amazon’s stock is selling at $3,367, your capital would have gained 1,395.41% or be worth $14,954.12. What if you’ve invested $10,000? How much money would you be accumulating now?

Compounding is key

Have you observed the pattern from the above examples? Investors become rich when they invest for the long term because of what we call ‘compounding interest’. With compounding, the money you made makes money. Think of it as an interest on interest.

Compare it to the interest you’ll get if you just let your money sit in the bank. You’re considered lucky if the bank gives you more than 1% interest. But if you invest your money in profit-generating stocks and you reinvest your earnings to generate more money, you’re looking at a high percentage of returns. Per data from Goldman Sachs, the average 10-year stock market return is 9.2%.

Visualise your results if you’ve been investing for 10 or 20 years through the graph below. You’ll see that over time, the compounded interest you’ll get from your deposits grows substantially.

Compounding interest through investing | VI
(c) Sadie Xiao

Not an overnight success

Time is money. In investing, the most important word is ‘time.’ As you have learned above, compounding interest, the investor’s best friend, works vis-à-vis the time element.

You can’t just expect to get huge compounding interest after a few months or a year of investing. You have to stay vested for several years. And yes, even when the market is bearish, you’d have to resist the temptation to impulsively and emotionally escape the market.

Consider Warren Buffett, another very successful investor. He bought his first stock at 11 years old. At 30, his net worth was $10 million. Until now, Buffett makes money through investing. He doesn’t let his emotions plus the market noise get in the way of his portfolio management. In fact, he believes a crisis is an opportunity for investors.

Discipline is also required for you to get rich from investing. If you can’t control your emotions, such as fear, greed, and envy, you’ll end up just blindly following what your surroundings tell you to do. But if you have more conviction in your investments, you’ll reap the rewards sooner rather than later.

For example, if you invested in Netflix in 2002 when its share price was $15 and got scared when its share price dropped to $8 in 2012, you would’ve regretted your impulsive decision now that it’s worth $517 per share.

The power of one investment

A single good investment can get you amazing returns to make you wealthy. One good egg in your basket can multiply over the long term, as long as you hold on to that egg for the long term.

Facebook, for example, proves itself to be a profitable company for investors. Imagine you’ve only invested in the company in 2012 when the share price was at $38. Now, you’ll benefit from the capital appreciation of this single investment as Facebook is now priced at $356 per share.

The same goes for investing, for instance, in Microsoft and other excellent-performing companies. Had you put your money in the bank instead of investing, your profits would not be the same.

So, who says you can’t get rich with one investment?

As we always say, investing can get you wealthy over time as long as you know how to do it properly. Tools, mentors, books, and courses are available at your fingertips. You only need to take the first step.


Disclaimer

No income guarantee or promises of any type are being made in this article. Know that your results will vary due to circumstances that are outside of our control. The author and the company do not warrant, guarantee, or make any representations about the use or results of the use of the products, programmes, services, and resources mentioned in this article. The reader, thus, agrees that the author and the company are not responsible for the success or failure of readers’ investment and business decisions relating to any information provided herewith.