When is the perfect time for you to start investing?
Is it better to start now, or wait a few years before you start investing? It is definitely better and more profitable to start investing sooner than later. The longer you invest the more you will earn, and reduce your risk over time. It takes time to grow your investments; this isn’t a get-rich-quick scheme. The longer your time horizon the better it will be for you to ride out any downturns in the economy. Downturns do happen and sometimes can last for months or years; therefore it's in your advantage to have a long term time horizon of 5-15 years.
I’ve written in the past about not putting your short-term savings in stocks and that includes ETFs, and equity mutual funds. If you are saving money to go on vacation, buy a car or a house in less than 5 years then don’t put that money in stocks. You can read more this topic here. The longer you wait to start investing the more money you stand to lose. Consider the story of Jack and Jill, where Jack lost $97,429 by waiting too long to start investing:
- Jill started investing at the age of 25, and invested $1200 each year earning 6%
- Jack started investing at the age 45, and invested $2400 each year earning 6%
- At the age of 65 they both stopped investing, both Jack and Jill invested $48,000 each.
- At the age of 65 Jill’s portfolio was worth $185,714 and Jack’s was worth $88,285.
- By waiting 20 years to start investing Jack lost $97,429
Moral of the story
The moral of the story is don’t be like Jack, start investing as soon as you can so that you can be financially free sooner than later!
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