6 Reasons Why You Should Start Investing Right Now
he best time to start investing is right now.
But maybe you keep telling yourself you’ll invest when you make more money, or that you’ll get around to it “someday.” Or maybe you’re worried the markets are looking a little shaky at the moment, so you’re sitting on the sidelines, waiting for a “better time” to take the plunge. Or perhaps you think you need to become a hardcore expert before you can actually do anything with your money that remotely resembles investing.
Also Read: Top 10 Reasons to Invest Your Money
Here’s the thing—putting it off could actually cost you more than you realize. Experts estimate that 40% of people have experienced a financial loss due to procrastination. By waiting to invest, you could be missing out on some potentially sweet financial gains. In fact, when you start investing could make a bigger difference on the amount you end up with than how much money you actually invest over time. So the sooner you put your dollars to work, the more you’re likely to benefit in the long term.
If you still need a reason to get started, here are six of them, along with some easy ways you can begin investing your money, pronto.
Time Is (Still) on Your Side
Ideally, we’d all start investing at birth. But let’s face it, many of us don’t think about it until we’re well into our 20s or 30s, even though we may have opportunities to invest before that. Don’t fret—you can become an investor at any age, but every second you wait, you’re giving up your greatest asset: time. Bonus: by investing when you’re younger rather than trying to sock away larger sums of money later in life, you give your money a chance to work “smarter” instead of harder. How? Keep reading.
Two Words—Compound Interest
Not only is time your best friend when you’re investing, but you’ll also reap the benefits of something called compound interest—a phenomenon genius Albert Einstein coined “the eighth wonder of the world.”
Here’s how compound interest works, to paraphrase Ben Franklin: Your money makes money. And then you make more money on the money your money makes.
To put it in nice round numbers, say you invest $1,000 this year, and you earn a 10% return on that money. That means you make $100 on your original $1,000 investment, and, as a result, you end up with $1,100.
What if you don’t contribute anything next year? Guess what—you still make money. How is that possible? Say you earn the same 10% return on your $1,100 account balance. Instead of $100, you actually earn $110 because you’re getting that 10% on a larger balance. Now, you have $1,210, simply because you let compound interest do its thing.
That’s the beauty of compound interest. Even if you never invested another penny, by starting earlier you’d still come out ahead of someone who chose to begin investing later in life. In other words, it pays to invest early and often. The longer your money can benefit from the power of compound interest, the bigger your gains will be as time goes on.
It Gives You an Opportunity to Take Control of Your Future
There’s something empowering about telling your money where to go. Rather than spending it, or worse, not knowing where your money is going, by investing, you’re giving your dollars a “job” to do—make you wealthier over time.
That said, investing isn’t about getting rich. It’s about building a financial safety net for yourself. At some point in your life, you’re going to have to stop working. When that day comes, wouldn’t it be nice to know you’ve created a way to support yourself without a steady paycheck from your 9-to-5? Or, better yet, what if you could choose to stop working when you wanted to, not when you needed to? Investing can help you create that financial freedom, and there’s no better time to start than right now.
You’ll Regret It If You Don’t
When asked the question, what is the one piece of investing advice they’d give to their younger selves, most expert investors will answer: “start earlier.” Yes, a chief regret of successful investors is that they didn’t make investing a habit sooner. Devotees of John Bogle, founder of the investment management firm Vanguard Group, have copped to regrets about not investing earlier in life on their dedicated “Bogleheads” forum online. Even billionaire investor Warren Buffett, who famously said “Someone is sitting in the shade today because someone planted a tree a long time ago”—and who bought his first stock at age 11—wishes he’d started at a younger age!
It’s Okay to Make Mistakes
Many people avoid investing because they’re afraid of messing up—by choosing the wrong stocks, for example, or losing money. Investing isn’t this big, hard thing that you have to spend a ton of time and energy on to get right. You don’t have to be a real estate mogul or a Wall Street tycoon, either. In fact, here’s some good news: You’re young, so can “afford” to make a few mistakes, especially when it comes to making your first investments
Thanks to compound interest, the earlier you get started, and the more money you’re able to set aside, the more likely it is you’ll come out ahead, even if your investment returns aren’t always in positive territory. The average annualized total return for the S&P 500 index over the past 90 years is 9.8%. Yet from 1928 to 2016, only six years finished with a gain within 5 and 10%, according to LPL Financial.
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