30 Jul Here Are the Reasons Why You Need to Start Investing Now
Keeping your money in a bank account might be a good way to safeguard it, but that could be as far as the benefits of storing your funds goes.
Everyone is likely to have heard of investing, but not all might recognise the advantages of jumping on the investment bandwagon early.
Read on to find out more about the reasons why you should be thinking about beginning your investment journey, and why starting sooner is always better!
Investing as part of a broader financial plan
It might be common for people to view investing as a mere source of side income or as an activity that can be endeavoured in only if one has spare time.
In actual fact, growing your wealth through investing is a means of making plans for your future, and safeguarding the aspirations you have for yourself and your loved ones, in the long run.
Investing needs to be viewed as a crucial piece of your lifelong financial plan, and you should be making purposeful investments. This essentially means that you should regard investing as a tool meant to help you achieve specific life goals.
Let’s take an example. You might be a young working adult planning to start a family in the near future. Education planning for your children’s education, purchasing a home or even harbouring the dream to embark on yearly travels will each require its own bulk of funds respectively.
If you are suddenly faced with having to fork out money for each of these big-ticket purchases or long-term expenses, looking to your general pool of savings to do the job can be both worrying and frustrating.
Invest early with these aspirations in mind. This gives you a longer-term horizon to work with in making sure that you have the financial assurance to fulfil each of these specific goals.
The power of compound interest
Starting small in investments can pay off significantly in the long term, that is the power of compound interest.
Starting early with a long investment timeframe that can endure into the future gives more time for your returns to build up with compounding interest.
This is also why beginning with a humble principal investment amount is in fact a viable and clever choice. It might not always pay off to wait for having a larger principal amount on your hand before making your first investment.
The above chart illustrates a comparison between an investment plan started at ages 20 versus 30. The way in which compound interest builds up is a force not to be reckoned with, it can and will realistically grow your wealth at a valuable rate if given sufficient time.
In essence, starting later will allow less time for compound interest to work towards your benefit.
Understanding the ins-and-outs of investing
An early head start gives you more time and room to genuinely understand how investing truly works.
To put it simply, learning how to make investments yourself takes a considerable amount of trial-and-error, and having the comfort of a longer time frame can give you the freedom you need to make mistakes.
Not only might starting at a later age set you in a more flustered mode, the benefits of an early start are in fact significant:
1) You have more time to stabilise and decide on a disciplined saving and spending routine, one that is conducive to meeting your long term financial goals.
2) Are you a conservative or aggressive investor? Figuring out your investment personality takes time. Being able to decipher this as quickly as possible will enable you to build an investment portfolio that is most suited to your risk appetite.
3) For certain life expenses, it is crucial that you have a foolproof plan in place to tackle them, just read our article on retirement planning here. It is true that for important periods in your life such as retirement, getting the hang of investing at an early stage gives you the financial know-how and maturity to make better plans.
Everyone should start early
Building up your investing expertise as early as possible will help you to avoid a situation where your financial capabilities wind up hindering you in pursuing your life aspirations and goals.
If you are unsure on how to kick start your investment journey, we are just a call away, and always happy to help!