Even with the cold mornings, many of us enjoy the benefits of exercising early in the morning. More time, more energy and more efficiency. Plus a greater sense of achievement and control….so when it comes to investing, the same principal and values often apply.
As a Financial Adviser for over 12 years, one of the most common things that I hear is “I wish I started investing years ago”….and whilst they are right, things would most likely be so much easier for them, the reality is that it is never too early to start investing for your financial future.
With the biggest and most important aspect being that the earlier you start investing, the longer your money will be working for you, and the more time compounding interest can add major efficiency to your financial stability, stress levels and security.
Case study: read James and Julia’s investing story
Let’s take 25 year old twins James and Julia….Julia being more motivated and appreciating the peace of mind of knowing that she is doing something with her hard earned money, starts putting $500 per month into a growth based diversified managed fund (earning an average return rate of 8% p.a.) and continues to do so for 15 years until she stops at age 40 investing a total of $90,000 over that 15 year period, which remains invested, but with no more further contributions.
James on the other hand decides to put off investing until she sees Julia stopping to contribute to her managed fund portfolio. He decides to do a regular investment plan as well but $1,000 per month, ($500 per month more) into the same growth based diversified managed fund, but continues to invest regularly for 15 years and stops at age 60….his total investment is $180,000 ($90,000 more than Julia).
However in looking at the long term results, both now aged 60, and each earning an average return of 8% p.a. Julia’s money has effectively multiplied by 5.73 times, with her portfolio being worth over $516,787.
James’s money has only multiplied by just over 1.8 times, with a portfolio worth $325,825.
Julia’s early start to investing trumps James’s portfolio in efficiency as she invested $90,000 less….and she has an extra $190,962s. This is all thanks to a very powerful ingredient called compounding interest.
The older we get, the harder or more challenging it comes to saving….more expenses, higher lifestyle requirements, long lingering bad financial habits…children, mortgages etc….the list goes on. So sadly investing gets pushed down as a priority, and we find ourselves saying “next year”….each year…15 years on….just like James.
So my advice is to start investing today. Build your knowledge of investing, create a healthy habit of investing and remember that you don’t have to stop 7 years into it, but you can keep going and allow the magic of magnificence of long term compounding interested continue working for you and for your ling term financial goals.