Self-made millionaire Ramit Sethi offers crucial advice for freshers and young professionals that can pave their way to becoming millionaires. The 41-year-old American writer of Indian origin told CNBC Make It, "Invest 10 per cent of your salary every year. And at the end of the year, increase that by 1 per cent. Do this for as long as you can, and you will be a multimillionaire.”
Speaking about his approach, Sethi recommended investing in low-cost index funds and tracking the stock performance of approximately 500 major US publicly traded companies, such as Microsoft, Apple, and Nvidia.
"By investing in an index fund, your money is spread across a wide range of companies, which automatically diversifies your portfolio. And since index funds are passively managed and simply aim to mimic a market index’s performance and returns, they tend to have lower costs than actively managed funds,” Sethi told the publication.
Sethi emphasised that the crucial aspect of investing is to start as early as possible. He explained that starting early allows your money more time to grow through the potential of compound interest. This means that you not only earn interest on your initial contributions but also on the accumulated interest over time.
"If 10 per cent seems steep to you, don’t panic. It’s okay to start by setting aside what you can and work your way up to a larger portion of your income down the road. By starting at your college graduation with your first job, you will set yourself up for a lifetime of living a rich life,” he said.
Investing your money early is one of the most important and best ways to grow your money. Overall, early investment is a lucrative strategy for investors willing to take on higher risk in exchange for the potential for outsized returns. However, success in early-stage investing requires careful research, due diligence, and a willingness to tolerate uncertainty.