What is the right age to start investing? Why is investing in stocks an incredible way of building wealth? Read on to find out.
Deciding when to start investing is not that easy. Some people say the right time to invest is when you start having a stable salary, others say it would be nice to start when you’re in your 30s and making a life. But really, what is the right age to start investing and why in stocks?
You might be thinking real hard if it’s too early or too late already to invest, but to tell you honestly, and basing on my personal experience, the right age to start investing is in fact, NOW. The earlier you start investing, the sooner you could start reaping what you have sown through the power of compounding.
What Does Compounding Do?
You should start investing in stocks because companies earning profits pay a sum of money to their shareholders, that is called dividends. By getting dividends on top of your original investment, your money continuously adds up by purchasing more investments or simply reinvesting. If you reinvest your profits and dividends, it could grow exponentially bigger through time. Having invested the earlier is always a wise and smart idea because it gives you more room for higher returns and make most of the compounding process.
But if you’re in your 20’s and thinks you’re still too young to start investing, should you wait further before you invest in stocks?
Here’s a scenario to help you decide:
Say for example you hold off and waited until your 35th birthday to begin investing and finally decided to place $100 monthly and waited for the money to grow. At the age of 70, you could get around $70,000. Now the catch is, what if you started investing five or ten years earlier? Imagine how much more your money could have grown, right?
The right age to start investing is as soon as you can, the earlier is better. No matter how small, it adds up and the earlier you begin, the more you are giving your money time to flourish and increase in value. Having a disciplined investment approach results to a fruitful future. But here’s the thing, always make sure to do your research on the companies you are looking to invest in and only take risk levels that match with your risk appetite. As you progress, life goals also grow more and even bigger so might as well start investing with your first salary and gradually increase every salary hike to achieve your financial goals faster.
What Does Early Investment Teach You?
There are a lot of existing studies and surveys that help you pinpoint when to actually begin your investing journey. But if you’re not sure of the right age to start investing in stocks, let me guide you. And so to start, I highly advise that you start as soon as possible because the earlier you invest, the richer you become in 5,10,15 years and more. The earlier you invest, the higher the returns when time comes. But you might still be confused, so I’ll just give you a hint of the most ideal timeline. Invest as soon as you finished college or as soon as you get your first salary. You can start small, $50 or $100 should be fine as long as you do it monthly and increase it with your salary hike. By investing earlier in life, you easily get accustomed to the effective pattern of financial discipline and independence and you learn how to budget your finances overtime.
Early investment gradually teaches you the value of saving and investing. Do not think that just because you are still young then you don’t need to pay as much attention into investing. Do not think that you can’t invest just because you are young and broke. The little cash you invest each month will put more money in your pocket in the future. Know the right avenues to initiate your investment regardless of the amount.
The Right Age to Start Investing in Stocks is Now. Why?
- You are Able to Save More and Support Your Retirement Plans
When you invest early, you eventually build a habit of saving more. You master the art of frugality and the more you are inspired to save. Early investing compel you to grow your money faster, and that results to bigger growth and dividends. You are inclined to save more by making wise decisions on spending money. Your thought process will eventually push you to cut unnecessary expenses and convert that saved amount into making more money.
I know when you reach a certain age, you'll come to a point when you become tired and just want to live your life comfortably, so you think of retiring early. Here’s the good thing, if you invest earlier, you can actually increase the probability of achieving financial stability at a young age so yes, it’s possible to retire early and live your life the way you want it. Saving for retirement from your early 20s rather than 40s gives you a better outcome by securing financial stability for you. Planning for retirement early is a must because the older you become, the more you are prone to circumstances that may require you to pay for maintenance fees at home, for your family or your own health.
- You Have More Time to Expand Your Means and Increase Your Money's Value
Starting your investments at a young age will help you become financially ahead of others. If you invest early, you will increase your chances to grow your money stash earlier as well. Having parked your profits to your bank account, you can actually make it multiply by becoming someone's creditor. Having the right investment avenues at a young age can do so much. It can help you expand your horizon and realize your ideas.
Since early investments make up compounding returns, your money's value also increase over a period of time. Investing early guarantees you will harvest huge advantages by the time you retire. Early investment also paves the way for your entry to the more advanced world of finance. It gets you ahead of others in terms of finances as your money grows as you also age. Having early investments will soon get you to afford the things you want that others who have invested late cannot yet.
- You Have More Recovery Time and Secure Your Future
Now that we are in the middle of a pandemic crisis, investing could actually be a big move to take on. Since global companies are still recovering, rest assured your investments will have more time to recover as well. If you start investing while you're still young, you have more time to make up for the loss of your investment, you have more room to grow. With early investment, your investment gets more opportunities to grow in value exponentially.
Of course, unexpected expenses can happen especially when you are in the midst of an emergency or crisis. But when you have invested earlier, you will have more cash onhand to help pay the bills and dues. Your early investments will actually help you get through the hard times and come to rescue you without the need to apply for a loan.
Our world now offers unlimited opportunities. Technology has boomed overtime and emerging platforms help us learn to invest wisely and how much to invest. There is no definite right age to start investing in stocks but starting earlier is the best there is to advise. The advancement of technology has now enabled us to start investing in the comforts of our home through our computers and access to internet so it's not impossible to start investing as soon as possible in the right avenues that can give high returns. If you have studied the background of the companies you are looking to invest, that will for sure help you take on more bold decisions and manage risks with ease.
The earlier you start investing, the more comfortable it is for you to scale up and build your wealth. Yes, the early stages in investing can confuse you at times and you will surely meet bumps along the way, but just keep going. Don't wait for the moment when things are already convenient for you, rather, start small. Give your money time to grow, just as how we nourish our plants at home. Everything takes time. Moreover, stick with your good investments for a number of years or so and let it compound. Trust the process and rejoice later.
Read the Entire Investing Series
- How to Start Investing in 2021
- Everything You Need to Know About Investing
- 3 Retirement Investing Strategies to Make Your Money Last
- Stock Investing 101 | 5 Ways Your Mind Plays Tricks on Your Trades
- Different Types of Investing for Different Personalities
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.