Investment Iron Law II: Patience is Key to Wealth Accumulation#
Working hard is not about making more money,
but about maintaining a state of mind
— challenge, goals, struggle, and success.
How Did Li Ka-shing Accumulate His Wealth?#
Li Ka-shing, ranked among the top ten wealthiest Chinese in the world with a fortune of nearly $7 billion, is the chairman of Cheung Kong Holdings and Hutchison Whampoa Limited in Hong Kong. His legendary journey to wealth and his influence in Hong Kong’s political and business circles have earned him another nickname — “Superman Li.”
Capitalizing on the Plunging Property Market
In 1939, 12-year-old Li Ka-shing moved to Hong Kong from his hometown of Chao’an, Guangdong, with his father. After two years of schooling, Hong Kong fell due to the Pacific War. The following year, his father died of a serious illness, forcing Li Ka-shing, the eldest son, to drop out of school and support his family. After Hong Kong’s liberation in 1945, he ended his odd-job career and became a salesman at a plastics factory, working over 16 hours a day. Three years later, at the age of 20, he was promoted to general manager. Two years after that, he used all his savings of HK$7,000 to start his own small plastics factory, “Cheung Kong Industries,” the predecessor of today’s largest conglomerate in Hong Kong, Cheung Kong Holdings.
How did Li Ka-shing, without even a primary school diploma, take his first step toward becoming the richest man by producing plastic flowers? In 1958, due to a rent increase by the landlord of his factory, Li Ka-shing bought a piece of land in North Point and built his own factory. In the early 1960s, the plastic flower industry declined, and in 1967, Hong Kong property prices plummeted. Li Ka-shing seized the opportunity to acquire land at low prices. In 1972, the Hong Kong stock market soared, and Cheung Kong Industries went public, taking advantage of the opportunity to raise capital from the public to purchase more land. In the 10 years following the completion of his first factory in 1958, his real estate holdings increased 50-fold. Cheung Kong now holds approximately 1.48 million square meters of floor space. Li Ka-shing has been investing in real estate for over 40 years, and long-term investment has accumulated his enormous wealth.
Having strived for 50 years and achieved success in wealth accumulation, Li Ka-shing has unique insights into success. He said: “Before the age of 20, 100% of career success comes from hard work; between 20 and 30, when a career has some foundation, 10% of success depends on good luck, and 90% still comes from diligence; after 30, the proportion of opportunity gradually increases; now, luck accounts for about 30% to 40%.”
The same applies to wealth accumulation. Before 20, all money comes from hard work; between 20 and 30 is the time to work hard to earn and save money; after 30, the importance of investment and financial management gradually increases. By middle age, the money earned is less important, and how to manage money becomes more critical. Li Ka-shing has been fighting for his wealth all his life. To become rich, one must have enough patience.
The Power of Compound Interest Takes Time
Many people who have heard my lectures often ask the same questions: “Saving 14,000 yuan a year to become a billionaire is indeed impressive, but according to your method, it takes 40 years, which is really discouraging!” “It takes 40 years to become a billionaire. By then, I might be dead. What’s the point of having billions then?” “Can you teach some secrets to getting rich quickly?”
Even I feel that 40 years is too long. At the repeated requests of the audience, I did spend some time studying this issue in depth. The result of the research is: Financial management requires a long time, and the effect is not visible in the short term. It is impossible to get rich quickly through financial management.
If someone starts now and saves 14,000 yuan at the end of each year, and if the money saved each year can be invested in stocks or real estate with an average annual return of 20%, we know that the wealth will grow to 102.81 million yuan after 40 years. Now, let’s ask: How much wealth can he accumulate after 10 years? Most people think that with such a high return, even with a shorter time, after 10 years of compounding, it should be at least 5 million yuan, some even guess 10 million, and the most conservative guess is 1 million. Similarly, this is a surprising answer: 360,000 yuan! The following calculation formula should be familiar to readers, but they will be surprised that the amount is so small.
With the same 20% return, 14,000 yuan per year results in 102.81 million yuan after 40 years of financial management, but only 360,000 yuan after 10 years, which is unbelievable! The difference is more than 300 times! Fortunately, this concept is presented to readers in a timely manner. Otherwise, if readers use the methods mentioned in this book, save 14,000 yuan every year, and invest all of it in stocks, thinking that they can become billionaires, they would be shocked to find that after ten years of hard work, with an average annual return of 20%, they have only accumulated 360,000 yuan! They might feel cheated. After struggling for 10 years, they can’t even afford a car, let alone become billionaires!
What is 10 years? Ten years is a long time. After 10 years of struggle, there’s only a little over 300,000 yuan. How discouraging! This is the frustration one inevitably encounters in the process of accumulating wealth through investment and financial management. Investors must understand that financial management is a “marathon” rather than a “sprint.” It’s about endurance, not explosive power.
The prerequisite for getting rich through investment and financial management is time, and a long time. You must go through a very long waiting period before you can see the results. If the invested capital is small, no results will be seen after 10 years.
Earning Your Second 10 Million is Easier Than the First 1 Million
Saving 14,000 yuan at the end of each year with an average investment return of 20%, even after 20 years, the assets will only accumulate to 2.61 million yuan. At this point, one is still far from being a billionaire. It takes 30 years to accumulate 16.55 million yuan, barely reaching the millionaire level. Only after 40 years of continuous struggle can one become a billionaire with 102.81 million yuan.
Annual Investment of 14,000 Yuan, Wealth Accumulation (20% Return, Unit/10,000 Yuan)
| Year | Accumulated Amount at Year End | Amount Increased in the Last Five Years |
|---|---|---|
| 5 | 10 | 10 |
| 10 | 36 | 26 |
| 15 | 101 | 65 |
| 20 | 261 | 160 |
| 25 | 661 | 400 |
| 30 | 1655 | 994 |
| 35 | 4128 | 2473 |
| 40 | 10281 | 6153 |
From the table above, we can see: by saving 14,000 yuan annually with a 20% investment return, the wealth increased by 360,000 yuan in the first decade, 2.25 million yuan in the second decade, 13.94 million yuan in the third decade, and 86.26 million yuan in the fourth decade. This is the characteristic of geometric progression, and it is also the principle that people engaged in investment and financial management should understand. Therefore, three important characteristics of investment and financial management can be summarized here:
- Most wealth is created in the later stages. From the above example, we can see that only 41.28 million yuan was accumulated in the first 35 years, while 61.53 million yuan was created in the last 5 years.
- In terms of amount, your ability to make money through financial management increases over time. From the table above, it can be seen that doing the same thing, the amount of money earned increases, the only thing needed is patience.
- Earning the second 10 million yuan is often easier than the first 1 million yuan.
Wealth accumulation doesn’t happen overnight.
Patience Pays Off#
A self-made man who got rich by investing in stocks once told me: “Now that I’ve made it, a stock price increase can easily bring in millions of yuan. Making money has suddenly become so easy, it’s unstoppable. Thinking back to the days when I first entered the stock market 30 years ago, it took a lot of hard work to earn tens of thousands of yuan. I really don’t know where the money went back then.”
This experience is not unfamiliar to many who have struggled to build their fortunes from scratch. Everything is difficult at the beginning. During the initial struggle, money is hard to earn. It takes a lot of effort to earn just tens of thousands of yuan. It’s puzzling why money is so hard to earn. Until success is achieved, and money comes rolling in, one wonders why making money has become so easy.
Time is the Stepping Stone to Wealth Accumulation
Everyone desires the ability to effortlessly earn their second million or ten million, reaching a state of abundant wealth. The problem is, before earning the second million, you need to have the first million. But how can you earn the first million? If you want to accumulate 1 million through investment and financial management, you need “time.” You have to go through a long period of hardship. If you can endure the difficult period of earning the first million, you can naturally enjoy the ease of earning the second million.
From the compound interest formula, we can see that time is an indispensable factor for compound interest to take effect. Patient waiting is a prerequisite for investment and financial management. Especially for wealth accumulation through financial management, the required patience is not a few months or years, but at least two or three decades, or even four or five decades.
The vast majority of wealthy people accumulate their huge fortunes gradually from small amounts of money over a long period. In the beginning, most people have very little capital, even negligible. However, success is woven from a series of small achievements. Great wealth is the accumulation of small wealth, coupled with the effect of compound interest.
The importance of time in investment and financial management is evident. Patience is essential for financial management. The more patient you are in enduring the long waiting period, the greater the power of wealth creation will be. This is the characteristic of “compound interest.” However, today we live in a “fast food” culture where everything emphasizes speed and efficiency: fast food restaurants for meals, express delivery for mail, highways for driving, one-hour photo processing, and crash courses for learning. People have become increasingly impatient and short-sighted, lacking patience. In investment and financial management, they are also impatient and lack patience, wanting to see results immediately. It may be more efficient to pursue speed in other matters, but investment and financial management cannot be rushed. Time is a necessary condition for financial management. The more you rush, the less you achieve. Based on my observations, a common mistake among investors is giving up halfway. They get easily discouraged during bear markets and simply sell their stocks and real estate, completely leaving the stock and property markets, not knowing that lack of patience and perseverance makes it difficult to achieve anything.
- Time is an indispensable factor in achieving wealth through financial management.
- The patience required for wealth accumulation is not a few months or years, but at least two or three decades.
- Patient waiting allows compound interest to take effect.
- How can investors achieve a state of abundant and unstoppable wealth? Long-term holding and patient waiting.
The Real Estate Investment Experience of Madam Chang Yao-Hung-Ying, Chairperson of Grand Pacific Construction
“Land I bought for hundreds of thousands in the past is now worth hundreds of millions.”
Madam Chang Yao-Hung-Ying, chairperson of Grand Pacific Construction, pointed out: In the 1930s, a mainlander investing in land in Taiwan was often ridiculed. But it was with this small capital and perseverance that Madam Chang Yao-Hung-Ying, who left Shanghai for Taiwan in 1947, when her husband became disillusioned with his business, saw the development potential of Taiwan. She picked up their real estate business skills from Shanghai and started buying land.
After more than 40 years, her long-term investment in real estate finally paid off. Her family’s business is growing bigger and bigger, and they now own two listed companies: ASE Technology Holding and Grand Pacific Construction. ASE Technology Holding is now the second largest packaging factory in the world. As for Grand Pacific Construction, it launched the Earl’s Court project in Xizhi in 1987, which boosted the real estate market in Xizhi and rapidly accumulated their family’s wealth, making them one of the richest families in Taiwan.
Madam Chang Yao-Hung-Ying has now passed the baton to her son, Jason Chang. Jason Chang, chairman of ASE Technology Holding, seems to have inherited his mother’s investment acumen. He’s the kind of person who buys land wherever he goes, whether it’s in Taiwan, Hong Kong, mainland China, or the United States. Perhaps in another two or three decades, Jason Chang will also say: “I didn’t expect that the land I bought for a few million back then would now be worth tens of billions.” However, Jason Chang’s wealth accumulation speed will be much faster than his mother’s because he has already laid a good foundation. All he needs to do is go with the flow, and his wealth will increase geometrically, with money rolling in, unstoppable.
Withstanding the Test of Time is the True Measure
It’s not your judgment that makes you a lot of money, but your patience.
A crucial factor in financial management is time. Without a correct understanding of it, impatience will naturally arise. Impatience leads to taking significant risks, turning potential success into failure.
Whether it’s the accumulation of wealth or experience, it’s not something that can be accomplished overnight. It takes time. Fortunately, God is very fair in this regard. Regardless of whether one is born rich or poor, noble or humble, everyone has only 24 hours a day and an average lifespan of about 75 years. Time is the greatest wealth in life, and a person’s honor, status, wealth, and happiness all depend on how they use this wealth.
To accumulate wealth through investment and financial management, time is an indispensable factor. It cannot be rushed. Investment and financial management can lead to slow and steady wealth accumulation, but investing small amounts of money and wanting to earn billions of wealth in a short period is, I can say with certainty, “impossible!” Just imagine, can a mother give birth without going through ten months of pregnancy? Can a farmer shorten the growth period of rice seedlings?
The growth of wealth is like the growth of life. It’s formed bit by bit, day by day, month by month, year by year, under the effect of compound interest. It cannot be achieved overnight. This is the law of nature, and God never changes his natural laws.
Luck is Not a Long-Term Strategy
Many investors make a fortune overnight and go bankrupt overnight. Their success is due to luck, and their failure is because “you may be lucky for a while, but you cannot always be lucky.” Any investment opportunity that promises overnight riches must hide a greater risk of overnight poverty. This is why most of those who fantasize about getting rich quickly through financial management end up losing everything.
As long as you are patient and invest your assets in the right investment vehicles, you don’t need to actively manage or worry. Compound interest will naturally lead to wealth growth, and becoming a billionaire over time is almost a certainty. In investment and financial management, haste makes waste. “Fast” is definitely not good!
If you really want to get rich quickly, I suggest you try entrepreneurship instead of investment and financial management. If any of the readers want to get rich quickly, what should they do? My sincere suggestion is to choose the path of entrepreneurship. I have studied the wealth accumulation process of many rich people throughout history and found that there are many examples of getting rich quickly through entrepreneurship. Bill Gates, the richest man in the United States, dropped out of college in his freshman year to found Microsoft and became the richest man in the United States in just 20 years.
However, the probability of success in getting rich through entrepreneurship is extremely low. According to statistics from the Taiwan Entrepreneurship Association, the success rate of a person’s first business venture is only about 7%, and entrepreneurial success does not necessarily mean getting rich. In other words, for every successful entrepreneur we see, there are at least dozens of unknown failures behind them. Moreover, the entrepreneurial process is very arduous. Working more than ten hours a day seems to be a prerequisite for successful entrepreneurs.
On the contrary, as long as the method is correct, investing money in the stock market and property market, and waiting patiently for decades, the probability of getting rich through investment and financial management is very high. It’s hard not to get rich, and the process is relatively easy and enjoyable! Which method you choose to get rich is up to you. I must emphasize again that there is a possibility of getting rich quickly through entrepreneurship, but it is absolutely impossible to get rich quickly through financial management.