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Next, learn howthe big wins are the ones that matter most when youre trying to build wealth.
The Power of Compound Interest
Investing your money allows it to compound over time.
Basically, the larger your portfolio is, the more it grows.
An investor who follows this plan would end up with a $100,000 portfolio in 7.5 years.
The investor would have contributed $76,000 and received $24,000 in interest.
Thats a significant improvement.
Thats because there eventually comes a point when portfolio growth outpaces contributions.
The key to generating wealth in the stock market is to spend more time in the market.
Sethi has been investing for more than 25 years.
He praised compounded growth in the stock market as something that turns small, consistent investing into something huge.
First, he said the thing that matters the most when it comes to building your wealth is time.
You have two choices, Sethi added.
Expenses like these are silent, but they can deplete your portfolio of long-term returns.
The percentage model allows you to set goals that are tailored to your finances.
Furthermore, the percentage model invites people to increase their monthly contributions as they make more money.
People get raises, pick up side hustles and develop new skills to pursuebetter career opportunities.
Your portfolio contributions can match up with the ebbs and flows of your income.
Sethi also recommended a challenge based on the percentage of your paycheck that you put into your portfolio.
The challenge is to increase your portfolio contribution percentage by 1% each year.
Then, inch it up to 12%.
If it’s possible for you to make more progress than that, then your portfolio will grow faster.
However, the annual 1% boost is a feasible challenge that will translate into a higher net worth.
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