Warren Buffett is widely regarded as the most successful investor in the world. His financial success is largely attributed to starting early and maintaining a disciplined investment strategy. Buffett began investing at age 10, and by the time he reached 30, his net worth had already grown to $1 million (equivalent to $9.3 million today). Over the years, he has consistently achieved an impressive average annual return of 22%.
At 90 years old, Buffett is still actively investing, with a current net worth of over $84.5 billion. Remarkably, $84.2 billion of that was accumulated after his 50th birthday, showcasing the extraordinary power of long-term investing
While Warren Buffett’s investment journey offers invaluable lessons, it’s important to realise that the key takeaway isn’t about becoming the next Buffett but understanding the immense power of starting early. In this article, we’ll show practical examples to show how even small contributions, made consistently over time, can lead to significant wealth. Whether you’re in your 20s, 30s, or beyond, we’ll explore how the timing of your investments impacts long-term growth, and why the best time to start is now.
A Practical Example of Starting Early with Investing
To illustrate the impact of starting early, let’s consider Person A. Beginning at age 25 with an initial investment of $50,000 and consistently contributing $12,000 monthly, Person A achieved remarkable financial growth. Assuming an average annual return of 7%, their investment portfolio would have reached over $43 million by age 70.
Key milestones:
- Age 70: Total investment: $6,480,000; Interest earned: $36,972,059.
- Age 80: Total investment: $7,920,000; Interest earned: $79,657,755.
| Starting Age | Initial Investment | Monthly Contribution | Total Investment | Total Interest Earned | Net Worth at Age 70 |
| 25 | $50,000 | $12,000 | $6,480,000 | $36,972,059 | $43,452,059 |
| 35 | $50,000 | $12,000 | $4,320,000 | $16,943,461 | $21,263,461 |
However, if Person A had delayed starting by just 10 years, the results would have been significantly different. Beginning at age 35, their net worth would have only reached $21 million by age 70—a 50% decrease compared to starting earlier.
This example underscores the profound impact of early investing. The power of compound interest allows even small amounts to grow exponentially over time. Therefore, starting sooner can significantly increase the potential for wealth accumulation. As Einstein noted, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”.
The Power of Time in Investing
Even with aggressive contributions, starting later can still limit investment growth. Let’s consider Person A, who began investing at age 35 with a principal of $100,000 (double the original) and contributed $24,000 monthly (double the original).
Despite these increased contributions, Person A’s portfolio only reached slightly over $42 million by age 70. This is still significantly less than the individual who started investing 10 years earlier, even though they invested substantially more.
| Starting Age | Initial Investment | Monthly Contribution | Total Investment | Total Interest Earned | Net Worth at Age 70 |
| 25 | $50,000 | $12,000 | $6,480,000 | $36,972,059 | $43,452,059 |
| 35 | $100,000 | $24,000 | $9,120,000 | $33,056,590 | $42,176,590 |
This demonstrates that time is a crucial factor in investing. The power of compound interest allows earlier investments to grow more significantly over time. Therefore, starting sooner is generally more beneficial for long-term wealth accumulation, even if it means contributing smaller amounts.
As Morgan Housel wrote in The Psychology of Money, “Time is the greatest force in investing.” The longer your investment horizon, the greater the impact of compounding. Compounding, often called the “Eighth Wonder of the World,” thrives on time. The longer you stay invested, the more exponential your returns become.
Final Thoughts
Many people delay starting their investment journey, often waiting for their incomes to grow before taking action. This procrastination can cost them valuable time, which is a key ingredient for building wealth. The truth is, that the best time to start investing is as soon as possible. Even if you missed the opportunity to begin in your 20s, the second-best time to start is right now. The sooner you begin, the more time you give your investments to grow and compound, helping you reach your financial goals faster.
If you have questions about the numbers or want to explore different scenarios, you can use my online investment calculators. Pick your desired investment option and experiment with various figures. Remember: The examples provided in this article are for illustrative purposes only. Actual results may vary based on individual circumstances and market conditions. It’s always advisable to seek professional financial advice before making any significant investment decisions. However, the basic premise still holds, that early investments have a greater potential for compounding growth over time.