The last shareholders' meeting of Mr. Buffett has just concluded. He began to reduce his holdings two years ago, and now he has more and more cash in hand. Another amazing move!
What is a secret? How can 95% of one's wealth be accumulated after the age of 60?
We always talk about Mr. Buffett, and we can't ignore value investing, compound interest, and the fact that 95% of his wealth was earned after the age of 60.
The initial impression given is that one's skills reach their peak after the age of 60, and they start accumulating wealth at an accelerated rate.
However, this is not the case.
Instead, due to the large scale, the earning speed slows down after the age of 60. Nevertheless, 95% of the wealth is earned after the age of 60.
This is the power of compound interest, or the power of time within compound interest.
The two core elements of compound interest are the rate of return and time. It can be said that as the scale becomes large, the rate of return decreases. So the secret lies in time.
For instance, the 94-year-old Warren Buffett currently has 100 dollars. When he was 60, he only had 5 dollars. It took him 34 years to increase his wealth from 5 dollars to 100 dollars.
At this level of wealth growth, many investors may not fully appreciate it, as the annualized rate seems rather ordinary.
An annualized rate of 9.2% may seem ordinary. Many rational investors aim for an annualized rate between 8% and 10%.
If this is also a secret, then this secret of wealth growth is not about achieving an extremely high annualized rate, but about maintaining a reasonable annualized rate for an extremely long period of time.
What is the secret of wealth accumulation? In this case, it is about maintaining a reasonable annualized rate for an extremely long period of time.
The level of returns is the foundation and prerequisite, while the investment time is the core and key.
Let's give it a try using a calculator. With an annualized return of 9.2%, 5 yuan can grow to 100 yuan in 34 years.
So, "how to make 95% of one's wealth be earned after the age of 60" can also be answered.
The foundation is to maintain a reasonable rate of return on investment. The key is to live longer.
The greatest significance of investment lies in:
Firstly, the overall increase in wealth in human society is the foundation and prerequisite for investment.
More importantly, by participating in the process of creating company value through investment, we can get closer to the source of wealth.
Or to put it another way, is investment risky?
It should be noted that not investing is even a greater risk.
