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How to Invest for Long Term Wealth

There are only a few pieces of investing advice that can be as simple and yet as useful as this:

“Work hard, spend little, invest the difference”

The snippet above comes from Straits Times correspondent Goh Eng Yeow.

There’s a lot of wisdom packed into Goh’s words. Investing for the long-term can provide decent returns if we stick to it. For instance, the SPDR STI ETF (SGX: ^ES3) – an exchange-traded fund which mimics the fundamentals of the Straits Times Index (SGX: ^STI) – has generated a total annual return of 7.11% from its inception up till the end of August this year; that rate of return can double our money every 10 years or so.

Saving to invest for the long-term though, may present a challenge for some.

Millionaire Next Door

My fellow Fool Robert Brokamp had once shared an interesting insight about millionaires from Thomas Stanley, the author of the book Millionaire Next Door (emphasis mine):

“Yes, higher-income households tend to have more wealth than lower- and middle-income households. But the size of a paycheck explains only approximately 30% of the variation of wealth among households. What really matters is how much of the income is invested.”

Said another way, it’s how much of your saved-income that’s invested which really makes the difference. Saving to invest, like I mentioned earlier, may be a challenge. But it’s not insurmountable for most. For tips on budgeting, we have resources at the Motley Fool Singapore to help. Hop on here!

Foolish takeaway

In the pursuit of our own financial goals, everyone has to start somewhere. As Robert notes, it may not be down to the size of your paycheck alone – what you do with your paycheck matters greatly too.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.