I would like to edit the topic question: How can I get rich on my own while still young? One can get rich through inheritance too. Therefore, I am not considering inherited wealth. How do you create wealth on your own? Is not easy. You will have to work very hard. If luck favors you, you will be rich sooner. Luck, I mean favorable conditions.
the hard part: The compound growth rate rule and the starting point of its trajectory.
Zero never gives you growth. Whatever growth rate you apply, zero always remains zero. First, you have to get into the positive zone. The starting amount is the biggest impact on your wealth. So you need to earn this big starting amount as soon as possible. For example, you invest $1 at a compound rate of 10%, approximately after 14 years it will become $4, at the end of 21.5 years it will become $8. You will be rich with $8. At the same time, if your initial investment is $1,000,000, you will earn $8,000,000 at the end of 21.5 years at a compound rate of 10% (800% of the initial investment). The coordinate point from where your trajectory is carried out is very important.
Wise investment will make you rich:
If you can get a higher growth rate, you will get rich sooner. In the example above, we considered only 10% compound growth. In fact, you can get a higher rate if you invest your money wisely. When I was young, I invested in a mutual fund (tax scheme, 3-year lock-in period) an amount of $5000 to get tax relief. After 3 years, the NAV was 500% of the initial offer price. I have $25,000. If he had invested more in this investment, he would have been rich at 28. That was a favorable time in life. It is rare in life. You can get this kind of favorable conditions 3 or 4 times in your life. 3 or 4, because you missed some in the past and you might miss some more in the future. Identifying such conditions is the key to getting rich. In general, young people will miss the first opportunity or even more like I missed. You will miss out on early opportunities if your mind is occupied with non-financial activities. Only experience will teach you.
Short-term investments will not make you richer:
Time is another important deciding factor. Accumulation takes its own time. Time and higher compound growth rate will make you rich. If you want to be rich in 7 years, then the growth rate has to be much higher. If your goal is $1,000,000,000 and you only have $100 now, then every year you have to grow 10x to reach your goal. That is an extraordinary growth rate. So it is quite difficult to become a billionaire with an investment of $100. The probability is very, very low. So don’t set an unrealistic goal. Allow time to accumulate your wealth.
The people around you is another important factor.:
99% of the people around you will make you spend your money. My dad asked me for money to invest in growing bananas. I gave him the money he asked for. After 1 year he told me that the entire banana crop was blown away by the monsoon wind. The return he got was zero. My money also went with the wind.
My uncle advised me to buy a car when I was 25 years old. He did not have enough money to buy a car. I had to borrow money. He would have gotten a bank loan easily. Somehow, I put off the idea of buying a car at the time, which was really unwanted. That decision was good and it made me richer now.
One of my neighbors was ready to sell his house and offered me a price. I had no money at the time. He only had half the money. He would have obtained a bank loan for the remaining amount. Somehow, I turned down the offer. That was really, really a bad decision I made in my life. That investment would have given me a 100,000% profit by now. This is another favorable what did I miss.
Do not invest in the stock market without learning the basics
I once bought 100 shares of a company (IT). Each share cost me 1200. In 6 months the market price reached 3600. I didn’t sell it thinking it was a value stock. I decided to put up with a lot. The following month, it started to go down due to a bit of a headwind. The entire stock market was in a tailspin. My stock bottomed out at the issued price of 40 or 45. I lost all my money. However, I did not sell it because there was nothing more to lose. I waited and waited patiently for 7 years to see the price rise to 85. During this period, the company had been correcting and consolidating its market share. I bought more shares of the same company. After 10 years, it is now trading at its previous peak.
Another stock I invested alongside the one mentioned above at around 45 hadn’t even gone up to 100 in the initial 10 year period. In the next 3 years, it went up to 250. In the next 3 years, it went over 1,000 and is now trading around 1,500.
However, there are other stocks that have never been able to rear their heads after the crash.
This is how stocks behave in the market. There are reasons why they behave like this. You have to learn the basics.
My advice is a conscious life. Study your environment and look for favorable conditions. Invest time and money in improving yourself, which will always help you. A favorable condition is enough to make you rich. Consider. Do not miss it.