5 Reasons Why You Should Start Investing Early
If you are in your twenties, you might be thinking of making money through hard work, a better job, or an appraisal. But, if you realize the power of compounding and starting early, then you can make money even while you are sleeping.
Do you know why starting early is key to a safe financial future? If you are young, you can invest in the long run. Even with the smallest risk appetite, you can make money in next 10 to 15 years, earning the most modest rates of return. Imagine, what would happen if you choose a high return investment? You could even be a millionaire. Here are 5 reasons why investment is important.
The fundamental advantage to young individuals is their extended time of investment. Even Einstein says that compounding is the 8th wonder of the world. But why does he say that? The more time you have the more rewards you can reap. It is like compounding your earnings year over year. The sooner you start the lesser capital you will need. Eventually, the better off you will be. Compounding silently multiplies your money. Every dollar you invest younger can be worth $3 or more dollars later in life.
Let’s take a small example. You have $100 to invest today and reap a modest 5% return per year. After one year, the value of your investment will be $105. If you remain invested, you will earn another 5% return on $105, not on $100. In 10 years, the value of your investment will be $162.89. Now imagine if you invested $1,000 instead of $100.
2. Practical knowledge
With time comes the flexibility and experience required to make substantial gains in the stock market. Starting early gives you time to refine your skills and strategies. Often, a loss teaches more to an investor than a guide ever can. You can learn how to trade, when to trade and how to make the maximum profits. You can also copy portfolio of other investors in order to replicate.
In your 20s, you can manage a small loss easily and take advantage of market falls. In your 30s or 40s, you will have to think about your spouse, kids and bills too. Losses are not as easy to bear at this time, even if you can manage to invest a higher sum. Young investors may not have a lot of capitals, but they can take bigger risks. Are stocks the right choice for younger investors? Of course. In fact, you can trade in stocks before you get a 401 (k) from your employer. Think about it. Check if you are making this five mistakes?
Young investors always have an edge over older investors because of technology. Tech savvy young investors go beyond typical stock screeners and stock charts. They can use automated investment tools that help them place the right orders at the right time. With technology, predicting stock movements may also become easier. Hence, even options become a great avenue for investment.
A person in his late 40s who have never invested a penny could be seen struggling with debt and household expenses. The value of money falls over time because of inflation. Additionally, the prices of goods and services also increase. If you are trying to make ends meet with a single income, it would become impossible to make things work. However, if you invest even a hundred dollars today and keep multiplying your investments over the years, you will be in a much better position. Your finances will be in check, you will have a commendable portfolio and you can even dive into your investments if the need be. Without investing you will be fighting uphill against inflation!
Don’t you think investing early is a better option? Now you know why starting early is key to a safe financial future. It will take more than a regular job to survive in this economy. Why not invest?
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