Investing is not a difficult discipline. At heart, it’s very simple.
There are three main factors:
- amount invested
- time
- strategy
For most people starting out, the list above is in order of importance. The amount you are able to invest, often expressed as your saving rate, will make the most difference at the beginning.
The amount of time you have will have a huge multiplier effect (see why Einstein called compound interest “the greatest mathematical discovery of all time”).
What you do with the money is relatively unimportant until you have amassed a certain amount. If you are starting out with a lump sum, your investing approach will matter more, but for most beginning investors this is something they can pick up as they go along.
Next time let’s take a closer look at saving rate and how you can increase yours.