What is the key to wise investment?

Warren Buffet is an example of the most successful investment icon of this world. He has not build wealth over night. No one can build wealth over night. To build wealth you must remember those steps of investment, budget to save, save to invest, invest long term and control your debts. But this is for sure that all rich people did something very different than most of us. We will discuss few such wise investment to-do's

Start the process of investment as early as possible.

Get the benefit of compounding of money

Once there was a king and a farmer. Both of them were good friends since childhood. One day they were playing chess and the farmer played a good game and defeated the king. King was very impressed with the farmers game and he asked the farmer to choose his reward. The farmer was very clever. He asked the king to give him 1 grain of rice for the fist square of the chess board. 2 grains of rice for the second, 4 grains of rice for the third, 8 grains of the rice for the fourth and so on till the 64 squares are complete. The quantity of grain that was required to fill was 18,446,744,073,709,551615.

Suppose you have 1 today. Every year your money doubles, then at the end of 64 years, your investment of 1 today will become 18,446,744,073,709,551615.

This is the power of early investment compounding of money. Lets take a more practical example. Assuming your father gave you 1,000 on your 10th birthday. As you was to young to handle that money he decided to make a fixed deposit of those 1,000 for next 50 years. Fixed deposit gave a steady return on investment @ 8% per annum.

    * Your investment of just 1,000 today will become 47,000 in 50 years
    * Your investment of just 5,000 today will become 235,000 in 50 years
    * Your investment of just 20,000 today will become 938,000 in 50 years


Source: http://ezinearticles.com/?Investment-Guide&id=3111509

This just prove that investing as early as possible is a good start.  Knowing the benefit of compound interest is my way to pursue my plan for investment.