Can Investing Make You Rich?
The short answer: yes, investing can make you rich.
Just ask Joel Greenblatt, author of our favourite series of finance and investing books: "The Little Book". Joel started out as in investor: his fund, Gotham Capital, once had a streak in excess of 10 years of over 50% returns every year.
However, it’s not about chasing get-rich-quick schemes or the adrenaline rush of high-stakes trading. Building wealth through investing comes from understanding the principles that work in your favour over time. If you’ve been hesitant about investing, this post will walk you through three key reasons why it can be your path to long-term wealth.
You just need time in the game
First, let’s talk about compounding. Compounding occurs when your investment returns generate more returns. Over time, the power of compounding can be extraordinary. For example, if you invest £1,000 and earn a 5% return annually, you don’t just earn 5% on that initial £1,000 the next year — you earn 5% on £1,050. Year after year, this small but steady growth snowballs into a much larger sum than you initially put in. The earlier you start, the more significant the impact. Think of compounding as planting a tree: the longer it grows, the more abundant its fruit. Joel's 50% over 10 years? £1000 in that would have been £57,665 by the end. Note: it is very hard to be as good as Joel Greenblatt, but you don't have to be.
Growth is the nature of the beast
Another reason why investing can build wealth is that economic growth tends to be positive over the long term. While markets have ups and downs, historical data shows that economies generally expand as human capital increases. People learn, innovate, and contribute to growth, which boosts companies’ performance. It’s essential to recognise that the drivers of growth — such as technology, healthcare, or energy — shift over time. But as long as human capital and productivity continue to rise, investing in the economy is likely to yield positive results in the long run. So taking your pick of a fairly robust economy and their best-priced tradable index just to put some money away and let nature do it's thing is a valid approach if that's what you prefer.
Risk is optional
Finally, investing and trading are not the same thing. You don’t need to chase high returns or gamble on stocks to build wealth. In fact, chasing big gains often leads to big losses. The goal with investing is to seek steady returns, even if they seem small at first, while minimising losses. Over time, these steady returns can accumulate to create substantial wealth. The key is patience and consistency, not making a quick profit.
In conclusion, yes, investing can make you rich — but only if you approach it with a long-term mindset. Focus on the power of compounding, believe in the long-term growth of the economy, and resist the temptation to trade frequently. Investing is not about quick wins but about building a solid financial future. Start small, stay consistent, and let your investments work for you.
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