Updated: May 12, 2020
A lot of people become impatient when it comes to investing. I can’t blame them because we’re getting used to having things quick.
Hungry? Go to a fastfood or just prepare some instant noodles. Need to talk to a friend? He’s always just a text or call away.
Sending a document? You can scan and email it within minutes. Doing research? Open your browser and Google what you need.
So it’s no surprise that when it comes to making money, we expect to see instant profits. But that’s not how it works, particularly when it comes to investing.
Here’s an illustration that shows you why you need to be patient in growing your wealth.
Let’s say that you put P100,000 in an investment that grows at around 18% per annum. Do you know how long it will take for your money to double or become P200,000? The answer is around 4 years.
Most people will say that’s a pretty long wait, especially entrepreneurs. If you’re good in business, I’m sure you can easily double P100,000 in less than 4 years.
But how long will it take the same investment to make another P100,000?
Yes, you would only have to wait around 2.5 years. Now that’s still a bit long, but I know you’re already getting my point.
How about the next P100,000? How soon can your investment make that amount?
The next P100,000 will only take around 2 years to make.
Wait a little over a year more, and you’ll have another P100,000.
Because of the power of compounding, the next P100,000 will always come much faster.
In fact, that P500,000 you already have will become P600,000 in a little less than a year.
What does it all mean?
Investing is a marathon – it is a patience game.
The benefits are not instant, but comes much later, and only if you let the power of compounding work its magic.
So invest now, and let your money grow.
Remember that when it comes to investing – time is your greatest ally.
I know you’re wondering, what investment can give 18% per annum growth? The stock market and equity funds are your best candidates for this kind of growth.
As a concrete example, I bought Jollibee (JFC) stocks at P34 per share back in 2008. At time of writing in May 2014, it’s being traded at around P170 per share.
It took almost 10 years for our investment to grow from P100,000 to P500,000 in our illustration above.
If that P100,000 was invested in JFC stocks, it would have become P500,000 in just 6 years – imagine that!