Afraid of financial crisis? Invest for the long term!
Albert Einstein was once asked to say what the most powerful force on Earth is. He said ‘compound interest.’ The power behind compound interest is really amazing. If you invest $100 a month from age 25 at 8% per year, by the time you reach 65 you will have $337,000. At 10% per year, this becomes $585,000. When you double your monthly savings to $200, you will retire at age 65 with $1,171,000 on your bank account. In order to achieve similar result starting at age of 45, you would be forced to invest more than $1,500 per month. Of course it is never too late to start, but as a general rule it is always better to start young. Don’t waste precious time – get investing.
Expecting an 8% annual return from the stock market over a long period of time is not unrealistic. From historical perspective, the stock market has returned more than this over almost all 20 year periods since 1802.
One of the best ways to invest your money in stocks is to purchase shares in an Exchange Traded Fund whose goal is to emulate the performance of the broader market. In this case little knowledge about stocks is required and, in the long run, it will virtually provide you returns which are better than any other type of investment.
It turns out that investing during a financial crisis doesn’t really differ from investing at any other time, with the exception that more opportunities are available for those with the right temperament.