We live in the information age, but this often is not a good thing. Why? There is way too much of it. When it comes to investing, it is difficult to know what to do. This is why sticking to the basics is vital if you want to be a success.

Bring up finances and people go motoring down all kinds of directions. Stocks are best! No, real estate is best! Ah, investing in government bonds is really the way to go if you want to make millions.

After a while, it can be easy to wonder not only who is correct, but what you should do with your personal financial situation. Ultimately, the answer is you can make money in nearly every area of finance, but only if you follow some basic rules.

One of the most basic and fundamental rules in finance is the power of time. Time? You probably have not heard too many pundits and guru talk about time, but it is truly one of the key factors in making money in the long run.

Time is powerful because the more of it you have, the more your money can work for you. As the years pass, you can incorporate gains into your portfolio and have them make money for you as well.

Consider the rule of seven in investing. Simply put, any investment will double in ten years if it earns an average return of seven percent a year. Alternatively, it will double in seven years if it earns an average return of ten percent.

The rule of seven is an abstract guideline, but it shows us a simple example of the power of time. Simply put, the longer you have, the better your ultimate return. So, how do you apply this to your life?

Enough with abstract examples! How about your IRA. Assume you get a 6.9 percent return. Assume you invest for 30 years and put in $2,000 each year. When it is retirement time, you will have over $185,000 in your account.

Now we can see the power of time. Assume we start investing later. All the figures are the same, but we actually put in $4,000 each year. We end up with a total of just under $100,000. Why? Because our gains did not have time to grow as well.

If you look closely, you will realize something interesting. In both examples, we actually put in the same $60,000. The only difference was the time involved. The longer period allowed our gains to also grow. This is known as compounding.

This is a simple rule you should take heart in. The issue is not really how much you invest, but how often. If you put $100 a month in an investment for 30 years, you are going to end up with a nice total at the end of that time.

Tags: Business

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