Sunday, November 12, 2017

The Magic of Compounding

A little patience and $5K a year will net you $1M, billionaire says.

"It's wrong for people to think that they have to be wealthy to get rich investing in the stock market, famed buy-and-hold investor Ron Baron told CNBC in a Friday interview.

"You have to have a small amount of money and invest it regularly for a long time, and live to get to be old. That's how you get rich," said the billionaire founder of Baron Capital, which has nearly $26 billion in assets under management. "

Here's what I tell anyone who will listen:  Get started.  Pay yourself first.  Whenever your pay increases due to a raise or promotion, add at least 50% of the new money to the portfolio every month.  Stick with a large index like the SP500 or the Total Stock Market Index for diversification.

The biggest argument I hear is that people can't afford to do this.  Too many bills and other responsibilities limit the amount people say they can save.

My answer is that you can't afford not to!  Time passes by and it's difficult if not impossible to make up for lost years of saving.

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