Invest As Early As Possible
Investing when you’re young is one of the best ways to see solid returns on your money. Every dollar is an employee and needs to be given a job. Many confuse investing as a risky way to grow wealth. This is wrong. Investing is essential to protect your money from the negative effects of inflation. If your money isn’t making money, it’s losing its purchasing power every year. And the only way to maintain your purchasing power and build wealth for the long term is to invest in assets.
“Compound interest is the eighth wonder of the world.” — Albert Einstein
Compound interest also can be thought of as “interest on interest,” which means your investment returns start earning their own. The power of compounding is one of the greatest tools in wealth creation, and the earlier you start investing, the better.
At the same time, people often wonder if it’s possible to get started with a little money. In short: Yes. Investing with smaller dollar amounts is possible now more than ever, thanks to low or investment minimums. There are plenty of investments available for relatively small amounts, such as index funds, exchange-traded funds and mutual funds. If you’re stressed about whether your contribution is enough, focus instead on what amount feels manageable given your financial situation and goals. It doesn’t matter if you’ve invested $100 or $1000 or $10,000. How that works, in practice: Let's say you invest $200 every month for 10 years and earn a 6% average annual return. At the end of the 10-year period, you'll have $33,300. Of that amount, $24,200 is money you've contributed — those $200 monthly contributions — and $9,100 is interest you've earned on your investment. What is important is that you are doing something to improve your future and build generational wealth.
Investing for 10-20 years may be scary and hard. But being old and broke will be a lot harder. Choose your “HARD,” and once you step off that ledge and you buy the one thing, then it’s going to start to make a lot more sense - you get to put money to work for you in order to get where you no longer need to work for money. Start now, there is no better time to get into the market than it is today. The sooner you start, the better chance you have to compound over a longer period of time. It also allows you to overcome the inertia of not investing, the longer you wait, the more inertia will work against you and discourage you from investing.
When it comes to investing, it’s not like “I invested and now I’m out” – it’s not like a game that you’re trying to win. If it was easy to buy and sell at the perfect time, more people would be wealthy. Slowly buying into good assets over time (AKA: dollar cost averaging) works so well because it requires minimal effort. Investing isn’t just about seeking early for profit. It’s a lifelong thing, it’s a journey, your path to financial freedom. None of us controls what happens in the market. But we all have control over how much we save, how we allocate our assets, how often we check the market value of our portfolios and how we make intelligent decisions.
There is no single way to invest that will guarantee success or the results you would like. And it's important to understand each instrument, how much risk it carries and whether that risk is aligned with your goals. There are always going to be scary headlines and intelligent-sounding narratives. Continue saving and investing and follow your plan no matter what the market is doing. You focus on what the market is doing and let the chips fall where they may.
Anyone who wants to succeed financially over the next 10-15 years needs to have a solid plan in place. Those that don’t have one will regret it. Inflation is still sky high and things are only getting more expensive. Your savings money is worth much less every year. You need to learn how to invest into assets that increase in value along with inflation. It’s the only way to protect your money.
Not investing at all and having $10k saved is not an option. You can always invest more, whatever amount you can will always be better than not investing at all. You’ll still be putting yourself in a much better spot financially when the time comes to start thinking about retirement.
Building investing habits from scratch requires continuous steps towards your financial freedom. As you take those steps guess what? If the market goes down, the value of your position two months ago may drop, but now you have a chance to buy a better deal. On the other hand, they will always say that the market is expensive - but, again you’re building that habit and you’re getting this compounding to work for you.
At the end of the day, it's not about where your money goes and when it goes, it's about the fact that you're partnering with the business you're actually buying. So if you buy an ETFs or individual stock, you’re partnering with represented businesses for long-term growth, working to help build and compound your wealth. Know that you will never be perfect, It's impossible to know everything on day one. You just have to start and not worry too much about making it perfect because nobody does it perfectly.
“The returns that you can earn, you’re gonna have fluctuations. Those are steps that you can use to help you generate better returns because you can bet your butt when Buffett was having a down year he was buying more things at a cheaper price and then when the stock market turned, which it always does, then he earned an 80% return in a year. You’re always gonna have years where you're gonna lose 20/30/40% of your portfolio. We all saw that in March 2022 or 2020, we all saw the market turn very quickly and very sharply and it was kinda scary. Everything was red, neither one of us sold out of the things that we owned and we bought more things that were on discount and cheaper that helped boost our returns when the market returned,” says Dave Ahren at The Investing for Beginners Podcast. There’s an old saying on Wall Street: If you don’t sell it, you haven’t lost it. In other words, the value of your investments doesn’t really matter until the day you need to cash out, so don’t worry about the ups and downs in the interim.
There will be ups and downs in the stock market, of course, but investing early means you have decades to ride them out — and decades for your money to grow. You cannot let fear of a crash keep you from investing. Throughout history there’s always been stock market bears giving doomsday predictions for one reason or another. But here’s the thing — It’s only relevant to those with a short-term mindset. The stock market is the most proven and resilient wealth-building tool that we have. It’s made it through every war, financial crisis, bear market, and recession ever thrown at it. Investing rewards long term thinkers.
If you feel that you don’t make enough money to invest, know that investing comes down to priorities. Learn to prioritize investing and treat your monthly contributions like paying any other bill. It’s how investing becomes a part of your budget. Start now, even if you have to start small.
Tiffany Lalremruati
