Friday, December 23, 2011

Why Invest Young?

If you ever talk to an established investor, they will most likely agree that the earlier you invest your money, the better. Believe it or not, investing at a young age is one of the best ways out there to secure your financial future. Also, investing when you are young is the best way to save up for retirement. While you may think you are too young to be worrying about your retirement, the best time to start saving up when most people think they are too young, even if you do not have a full time job yet.


Take Advange of Compound Interest:
The historical average for the growth rate of the stock market is about 10% per year. This means that if you start your investing in a mutual fund that mimics the market (there are a ton of them out there), you will get an average return rate of 10%. While this is the easiest way to invest and get a sizeable return, you can earn much much more by building up your own portfolio of individual stocks.

Let’s say you are 20, and you are thinking about retiring when you are 60:
If you invest $10,000 at the start and earn a 10% yearly return, you will have $452,592 when you are 60. Remember, that total is without adding at all. If you invest smart and add an additional $10,000 every year at a 10% interest rate, you will have $4,878,518 after 40 years.
Let’s just stay that you are investing better than average, at a 15% return rate per year. With just the initial $10,000 investment, you will have $2,678,635 by the time you reach retiring age. If you manage to supplement this investment with an additional $10,000 per year at a 15% rate, you will end up with a whopping $20,469,538. That is enough money to live an extremely comfortable lifestyle in retirement!
As you can see, the magic of compound interest is a very good reason to start investing your money at a young age. There are, however, indirect ways that investing young will be beneficial to your financial life.
*You Further Your Investing Education
One thing that most people will agree on is that the more you do something, the better you get at it. In my opinion, this is the most important reason to invest young. Putting your money in various investments at a young age allows you to learn the ins and outs of the investing world; putting you way ahead of the game.

In the end, if you or one of your peers is ever asking "Why should I invest young?", ask "Why not invest young?" By setting aside only a small portion of your savings into various investments, you will learn ways to be to make money and stay out of financial trouble for the rest of your life.
Do you know any other solid reasons why someone should invest young? Perhaps some reasons not too? I would love to hear them in the comments below!

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