When is the best time to start investing? Remember how last week we talked about how time is more important than money? When it comes to investing, that’s true in a very literal way.
A lot of people never start investing because they’re afraid they’re going to lose money. And yes, it’s true that you can lose money if you’re not careful. But it’s also true that if you don’t invest at all, you’ll definitely lose money.
Blame inflation. Inflation means that on average, our money is worth about three percent less every year. Say you put 100 dollars under your mattress and take it out 30 years from now. Technically, you still have a hundred dollars, but that money will only buy 40% of what it can buy now. It’s lost 60% of its value. In fact, it’s losing just a little bit of its value every single day.
Well, that sucks, you’re probably thinking. Whether I invest or not, my money’s at risk. How can I win?
Believe it or not, the way to win is to start investing now.
Here are three reasons why you should start investing now.
Reason #1. Start Investing Now To Allow Compound Interest To Work Its Magic
Compound interest is the opposite of inflation. Instead of sticking your hundred dollars under the mattress, let’s say you invest it in the stock market, which historically has returned an average of about 10% each year. After the first year, you’ve made a profit of $10 dollars. In the second year, though, you’re investing that entire $110, not just your original $100, and you make a profit of about $11. You reinvest that $11, and keep doing that every year.
When you take that money out of the account 30 years later, your $100 has now grown to $1983. That’s not a bad return on your initial investment of $100, and you’re way ahead of inflation.
But that’s only if you give it enough time. If you invest for 20 years, you get $730. And if you give it 10 years, your investment is only worth $270. You’re still beating inflation, but you’re missing out on the benefits of long-term investing.
Keep in mind that in this video, I’m not even talking about dividend payments you can get on top of the stock market price gains. We’ll leave dividends for another time. but the point is that,
The sooner you start, the longer you have to take advantage of compound interest.
Reasons #2. You can invest more over the long term if you start investing early
Most of us don’t start off with a huge sum of money that we can invest all at once, and if we wait until we’ve saved up a thousand dollars or ten thousand dollars or whatever we think we need, we’re losing out on the benefits of allowing our money time to grow.
But that’s okay. You can start with very little and still see amazing results over time.
Back to our $100 investment. Say we start with that and we’re still earning 10% interest each year, but now we’re going to contribute another $20 every month in addition to that original $100. Now, after 10 years, our investment is worth $4400. After 20 years, it’s worth 16 thousand, and after 30 years it’s worth—wait for it—$47,570. That’s a total of just $7300 that we invested that, thanks to time and compounding, is now worth close to 50 grand.
The more time you have, the less money you need to start building some serious wealth.
Reason #3. To give yourself time to recover from mistakes and market downturns
Now, fair warning, in real life it’s rarely as straightforward as investing your money and watching it grow by 10% every single year.
As I mentioned earlier, the stock market has returned close to 10% a year in gains over the past 90 years. However, that’s the average. Some years have returned a lot more. Most years have returned less. Sometimes, they’ve returned a lot less. Sometimes, the markets have even lost money.
That’s never fun, but it’s a natural part of the cycle. And the sooner you start investing, the easier it will be to ride out the extreme lows and take advantage of the extreme highs.
This is another reason why it makes more sense to contribute a little money each month rather than wait until you’ve saved up a big chunk. Sometimes your monthly contribution will be getting in when the market is high, other times when it’s low, so over time, you spread out the risk. It beats investing everything at once and then watching the market tank a week later.
When are you going to plant your tree?
There’s a saying that the best time to plant a tree was 20 years ago. The second best time is now.
The more time you have on your side, the less money you need to invest. And the less time you have, the more money you need. So don’t wait.
If you’re ready to get started but not sure exactly how, make sure to click on the link here to secure your spot for my free online training, 3 Secrets to Make Your Money Work For You, to learn how I started investing and how you can too.
Remember: Invest Divas start early and finish wealthy.
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