Investment Matters more than the Returns

I was talking to one of my friends who has not invested in any of the asset classes but has a good amount of liabilities like a Car Loan, Credit Card Bill etc. Now he is asking my opinion about Crypto stating that if he invests now will he get good returns so that he does not have to worry about the asset class. I have told him that it is not only risky but also not practical. If this would have been true, everyone will invest a small amount and will not have any other investments.

PC: Pixabay.com

Actually, when we start our investment journey (like my friend who is about to start), our investment matters more than the returns. That means when we are starting the investment it is our investment value that determines how quickly our wealth grows and not the returns that we get. That means if I get 100% returns on a portfolio of $1000, it will be only $1000 profit. But If I get 11% profit on $10000 it will be $1100. That means even though I have got fewer returns since my capital is more, my profit is much more than 100% returns on $1000.

For my friend, he is actually running after returns rather than creating the capital. Rather what he should do is to increase his savings rate and start building his capital through investment in Crypto or Stocks. Though it's hard in his case because most of his income goes towards loans and credit cards still he has to come out of the liabilities in order to create those decent savings every month to put in the asset column.

Other than this the only option for him to increase his income, so I have suggested he start writing on Hive because that does not only help him to earn extra income but also help him to create the asset class until he comes out of the liabilities. That is a side hustle, and there is no better way to do side hustle than being on Hive Blockchain.

PC: Pixabay.com

As Rome is not built in a day, your wealth also does not get built all at once. Creating wealth actually takes time, even years. I have been on this blockchain for years to have a good amount of HP powered up and that is because my goal was not that I will get 20K HP in one day rather 20K HP in 5 years which seems like a realistic goal. So yes Rome was not built in a day, but actually, they were laying bricks every single hour of every single day to build Rome. Similarly to create wealth, it is not that you only need returns but actually you have to lay brick (savings every day or month) for years maybe to create the initial wealth and then get decent returns to actually have good wealth in your pocket.

That actually sums up that in the starting your savings rate matter a lot and over time your investment returns, we should not run after returns from the starting because 100% returns on low investment is actually less than 10% returns on a big amount.

Posted using LeoFinance Mobile