Wealth Creation: The Secret is to Start Early

Anyone interested in investing must have heard about the investment acumen of Warren Buffet. He is considered to be a genius investor that has helped him to build a vast fortune. His investment generated return of 22 per cent annually for more than 35 years. For many years he remained the wealthiest men on earth and still ranks fourth. At the end of 2020, his net worth was at USD 85.6 billion. Out of this, USD 84.2 billion was accumulated after his 50th birthday and USD 81.5 billion after reaching 65 years. 

The key aspect that investors miss while drawing inspiration from him is that he has been investing for 75 years now. Warren Buffet started investing when he was just 10 years old. Imagine if he would have started investing at the age of 30 – his net worth would have been 98.12 per cent lower than what he has now. So, Warren Buffet has a skill and knack of investing, but what helped him to accumulate wealth is ‘time’.

If you are still not convinced about the role of time then consider the case of the man who solved the market equation, Jim Simons from Renaissance Technologies. His flagship Medallion Fund has generated return of more than 71.8 per cent annually between 1994 and 2014, more than thrice what Buffet generated. Still, his net worth stands at USD 23.5 billion at the end of 2020, a quarter of what Buffet has. The big difference in their net worth can be explained by the age at which they started investing.

Jim Simons started investment when he was 50 years old. His investment got lesser in time to compound. This is the power of compounding, the eight wonder, according to Albert Einstein. So, if you want to create a sustainable wealth, the secret ingredient is to start early and remain invested.

SHASHIKANT