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Educational Resources

By Edward “Ed” V. O’Neal, Senior Vice President and Manager, Retirement Plans

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The thought of participating in the market can be a very scary proposition for those just beginning their investment journey. Many people who are considering investing fixate on a variety of perceived roadblocks, bringing to mind a variety of questions. Is now the right time to start investing given the volatile markets? Do I make enough income to start investing? Do I understand investing well enough? If you’re not careful, you can convince yourself to wait for a “better” time to take the investment plunge. However, the truth is that now is always the best time to start investing.

Procrastinating could be more costly than you realize, and any delay could cause you to miss out on potential financial gains. In fact, deciding when to start investing in the market could have a bigger impact on your financial success than how much money you actually invest. Ultimately, investing is one of the best ways to build wealth over time, and starting that process as early as possible can provide some key benefits, including:

  • Time is on your side – This is perhaps the most important benefit of all; the earlier you can start a disciplined savings and investment plan (even with modest amounts), the longer time horizon you have for investing and saving, and the better chance you’ll have for establishing an investment portfolio that will increase in value over time.
  • Compounding returns – The returns on your investments can be extremely powerful over the long run, so the earlier you get started the greater the chance to take advantage of this. Due to the compounding return process, even modest and regular savings in an investment or retirement account can lead to big benefits.
    • For a simple illustration, an individual saving $100 per month starting at age 20 could end up with approximately $264,000 at age 60 – putting in only $48,000 of their own money.*
  • More time to recover from mishaps – Starting an investment program early allows you more time to recover from any investment mistakes. We’ve all done things we wish we could take back, and whether it’s choosing a bad stock or a low performing mutual fund, mistakes are just a normal part of the investing experience. The earlier you start investing, the more time there will be to recover from any mistakes.
  • It’s easy to invest these days – It’s probably never been easier or less costly to start investing than right now. Whether through employer-sponsored retirement plans – like 401(k) plans – or through techniques that can allow modest investment contributions into investment and retirement accounts, such as dollar cost averaging.**

If you’re just starting the process, biting the bullet and getting an investment program up and running can be intimidating. On the other hand, waiting until it’s a convenient time can lead to a significantly reduced nest egg. Don’t allow fear and excuses to stop you from taking advantage of the benefits and compounded returns of investing in the market. Beginning with small investment amounts can still lead to big financial success. If you need assistance reviewing your savings and investment goals, as well as creating an investment plan, contact a financial advisor today.

 

 

*Assuming market returns of 7% per year, compounded monthly

**A technique that permits the purchase of small quantities of an investment over some period of time at regular intervals. Over the long term, dollar cost averaging can help lower investment cost and potentially boost returns.