The power of compounding in share trading
One of the greatest mathematicians and physicists of all time Albert Einstein said, “Compound interest is the greatest wonder in the world. He who understands it earns it…he who doesn’t pays it.” His assertion is based on the fact that compound interest is a fundamental component of wealth creation and by understanding just this one principle, one can make a significant difference to their financial independence over the long term.
Compounding occurs when one’s earnings on an investment are added to the amount they originally invested. An investor receives interest, not only on their initial investment, but also on the prior interest added to their investment. Sounds simple, but not a lot of people understand how powerful it is when applied or how the total return grows exponentially over a longer timeframe.
The length of time you invest is a key factor in meeting your financial goals. The earlier you start, the easier it will be to achieve them. Many investors lose out because they wait too long to get started or invest too little. If you don’t start early, it can be difficult to catch up. It pays to start investing as soon as you can, and to take advantage of the power of compounding.
When you’re younger, saving for something that’s years away—like retirement—may not seem important. But that is exactly when you should start saving. The more time money is invested, the more time it has to grow. And one of the ways to give money a chance to grow over the long term is by investing in some form of shares.
If one begins investing at a young age history has proven that that they end up with far more than those who invest later in life. Having time on your side means having a longer time period of being able to save money to invest and a longer time period of being able to find investments that can increase in value. Moreso, compounding returns are extremely powerful over the long run, and the earlier one gets started the greater their chance is to take advantage of this. Put more simply this is the power of the time value of money. Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits.
Investing while one is younger improves on spending habits though this benefit is generally overlooked by many, but investing early on definitely helps develop positive spending habits. Those who invest early on are much less likely to have issues with overstepping their boundaries in spending over the long run. Investing teaches important lessons and the earlier you are able to learn those lessons the more you can benefit, if you are a young investor you are putting yourself ahead in the world of personal finance as a whole. By growing your investments over time you will be able to afford things that others can’t. Your personal finances are bound to get tight at times throughout your life, and investing at a young age can help in those tight times.
It is important to note that saving money to invest at a young age isn’t easy, but you simply can’t afford to wait to invest when it is convenient. Don’t shy away from investing because you don’t have enough, simply start with making small investments and give them time to mature.
Investing in shares while one is young is one of the best decisions one can ever make. This is because shares are easy to buy. C-TRADE has eased the way investors do business on the capital market. Investors do not need to physically visit their respective stockbrokers. Investors only have a virtual interaction through the online and mobile trading platforms. C-TRADE gives investors the flexibility to access the platform in different ways namely, online, mobile application and the unstructured supplementary service data (USSD) whichever is convenient.
This platform has the ability to reach out to the remotest parts of the country, thereby encouraging participation by all citizens. The platform also allows Zimbabweans in the diaspora to participate on the local stock market as it has payment gateways that enable their participation. Through these tools, retail investors can trade securities, make or receive payments, obtain statements and follow market news anytime anywhere.