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Mistakes and Lessons Learned
If I could go back to 2016, I would tell my younger self one thing: start investing immediately. I saved money for years but only began investing in 2022. In 2016, I did not have enough information, I did not know my options, and I did not know how to start. No one taught me about investing at school or at home. I started studying this field in 2021 after seeing an interview with Radovan Vávra, a former director of a Czech bank. He explained how simple the math behind investing is, which was a big surprise to me. Even elementary school children could understand compound interest and what is an ETF tracking a global stock index. It baffles me that these concepts are not taught in Slovakia. Just show these two things in math class, calculate a simple example, and that is it! Our whole society could be richer.
The Basics of Investing: Compound Interest 10 %
Let me explain it as simply as possible. Imagine you have two piggy banks. Every month, you put $10 into each piggy bank.
Piggy Bank 1: No Interest
This piggy bank just keeps your money safe. Every month, you add $10. By the end of one year, you have saved $120. If you kept doing this from 1980 to 2024 (44 years), you would have saved $5,280.
Piggy Bank 2: With Interest
This piggy bank is special. It not only keeps your money safe but also gives you extra money every year for keeping your money there. This extra money is called "interest." Let us say this interest is 10% per year.
After the first month, you have $10. After the second month, you add another $10, making it $20. At the end of the first year, the piggy bank adds interest, so you get more, like $120 + 10% = $132. This keeps happening every year.
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Disclaimer
This article is intended for informational and educational purposes only. It does not constitute financial advice, a recommendation to buy or sell any securities, or a guarantee of future market performance. The views expressed are solely those of the author, who may also be an investor. Investing in financial markets involves risk, and each reader should make their own decisions independently and, if necessary, consult with a licensed professional.
Summary
Common questions on this article's topic
What is compound interest and why is it so powerful?
How has the global stock market performed over the long term?
Why is starting to invest early more important than investing large amounts later?
Why is not compound interest taught in schools?
If you have any thoughts, questions, or feedback, feel free to drop me a message at mail@richardgolian.com.
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