Waiting for the ‘right’ time to finally take the plunge into investing? You might be barking up the wrong tree. Stop procrastinating and start investing as soon as you can.
Why is it important to invest early?
With investing, time is literally on your side so the more of it you give yourself, the better off you could be. The earlier you start, the sooner your money could begin benefiting from the power of compound returns – where you earn returns on your returns. Let’s say you invest £100 and receive a hypothetical dividend of 10% every year. In year one, you would make a gain of £10 which is reinvested into the investment. But, in year two, you would make a gain of £11. How come? You’ve earned a return not only on your initial £100 deposit, but also on the £10 you earned in year one. Over many years, this can quickly add up, so the earlier you start this process, the better. Look what can happen when you procrastinate:
Both Zoe and Ben decide to invest £100 per month in a Stocks & Shares ISA. Zoe starts doing so on her 25th birthday, but Ben prefers to wait until he’s 30. At the age of 60, Zoe could end up with £86,503 and Ben could get £63,764 – that’s a £22,000 difference*.
By delaying your investing adventure you’re waving goodbye to potentially more money to fund your future goals, so it’s important to make the most of the present.
* These are projected values for an investment plan with a Confident Style (Medium Risk Plan) and they are correct as 12/03/19. Figures used are only forecasts and are not reliable indicators of future results.
Remain invested over the long-term
Entering the investing world early is key, but what you do afterwards counts too. And a good way to take advantage of compound returns is to remain invested for a number of years. Many investors will try to predict when it’s best to be invested and when they should sell their investments to minimise losses – this is known as market timing. In practice, it’s almost impossible to successfully predict where financial markets are heading next, so avoid such challenges and simply think long-term. All financial markets experience bumps over the short-term. This can be stressful, but instead of reacting to every single sneeze, try to stay calm, focus on your long-term goals, and consider investing regularly so you can take advantage of lower-priced investments when the time comes.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.