TikTok, Twitter, Instagram, and Facebook are rampant with stories about people who are making millions of dollars investing. They all want to give you the impression that they are millionaires – overnight – and have the secret formula to becoming an overnight financial success story. Are they real? Is this possible or probable? Let’s deconstruct some of this hype and learn the real way to build wealth.
As a certified CPA, I can tell you that it is not probable that you will become a millionaire overnight like “17-year-old Landon” who brags about this on TikTok. But as a real investor and CPA, I will give you my strategy, tried and true, to building real wealth – no, not instantaneously. My strategy is called the “wealth triangle.” It is the foundation for wealth building. Like any good, structurally sound building which has a strong foundation, the wealth triangle is the cornerstone to building wealth. There are three components to the wealth triangle: time, contribution, and return.

TIME is by far the key element in building wealth rather than returns or contribution. Let me show you how and why this is so vital to your portfolio. We are going to use Jake who is 20 years old and Sarah who is 30 years old as our investor examples. Both invest $1000.00 a month. Jumping forward in time to age 50, Sarah believes she is the more intelligent and savvy investor than Jake which she is by 2%. While 2% doesn’t seem to be significant, it actually is. However, TIME is the key element. Sarah and Jake both invested the same amount until they each reached 50 years of age. That means Jake invested for 30 years and Sarah for 20 years. The ten year difference is huge. Jake’s $1000.00 investments returned 8%, but Sarah’s $1000.00 investment returned 10%. You might expect that Sarah’s return was much higher than Jake’s, but, infact, it was not. Jake at 50 years of age would actually have amassed 1.4 million dollars because he had money invested for ten more years than Sarah, and Sarah only amassed $700,000.00. Even though she yielded a higher return on her investments, Jake had the power of TIME, resulting in Sarah only having half as much as Jake. So how much higher does Sarah’s return need to be compared to Jake’s in order for her to yield a higher amount? The wonder and power of time continues to outweigh the rate of return, making it a more important part of the wealth triangle. For example, if Sarah returned 12% which is 2% more than the historic market value of return and would be rare, she would still underperform Jake by $864,000.00. At 15% which is what some of the modern-day traders claim they are yielding, Jake still wins with Sarah only reaching 1.2 million dollars. It is not until she has a 16% annualized return, doubling Jake’s rate, over her twenty years of investing that she will be able to match Jake’s yield. This is the power of TIME.
Tale a look at the two charts below to see what impact time can have on your investments.
We can even look at these investing scarios in a different light to see the impact TIME can have on your investments. Let’s go back to Sarah and Jake, our two savvy investors. Jake invests $1000.00 a month from 18 until age 30 and stops. He doesn’t invest any more money and just keeps his money invested without making any further contributions. This is the Elon Musk route. Sarah, on the other hand, doesn’t invest until she is 30 years old at which time she decides to start investing $1000.00 a month. She does this until she is 65-years-old. We will keep the variable of their earrings the same, both earning 8% during the duration of their investment timeframe. Interestingly, when Jake is 65 years old, he will have 3.4 million dollars in his investment portfolio, and Sarah at the age of 65 will only have two million dollars. Poor Sarah! That’s the beauty of time. Even IF Sarah earns 10% over her investment timeframe compared to Jake’s 8%, she will still not be able to outperform him, having 3.3 million dollars compared to his 3.4 million dollars as the following charts demonstrate.
Side-by-side we can understand exactly what is going on here. TIME!
While the two other parts of the wealth triangle are contributions and returns, you can understand that the component that carries the most weight is time. I advise you to make automatic contributions to low-cost index funds and exchange-traded funds (ETFs). This recipe will enable you to beat 90% of the investors in the market. You have to ride out the market in order to amass the returns that you desire. There is no recipe or formula for becoming an overnight millionaire. Albert Einstein understood this concept, reportedly saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” This is the concept of TIME. That is why Warren Buffet amassed 99% of his wealth AFTER the age of 50. Time matters. And that is why I advise you to invest as early as you can, to invest now rather than later, and to be patient. Good things take time. Don’t be lulled into the get-rich scammers.
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