The Importance of Investing Early
The importance of investing at a young age cannot be overstated. This doesn’t mean you need to give $100K to a hedge fund manager or become a trader on the NYSE. Investing young can simply mean utilizing online investment services with no minimum limit or buying assets like cryptocurrency to hold over the long term. And while it may seem sufficient to start investing in your 30s/40s when you have some savings and a steady income, there are massive benefits to starting in your late teens/early 20s.
The Time Value of Money
Investing young allows you to enjoy compounding returns and collect many additional years of interest on an investment. By re-investing earnings, you can grow your investment much faster compounding your returns. Assuming a 5% return rate, a $10,000 investment at age 20 would grow to $70,000 by age 60. The same initial investment at age 40 would only grow to about $26,500. Investing $25,000 at age 40 would yield roughly $66,000 by age 60. As you can see, investing $10,000 at age 20 is more beneficial for retirement planning than investing $25,000 at age 40. Allowing a little money to grow over time, rather than waiting until you have a lot to invest, is a prudent move when you consider the time value of money.
Investing early will allow you to gain some much-needed experience to become a skilled investor over time. As with any profession or hobby, investing cannot be mastered overnight. You’ll need some trial and error learning and to gain experience analyzing markets and financial data. Over the course of many years, you will continually refine your investing strategy to reflect experience, advice and new knowledge. Those who wait until the end of their careers to start will be behind in what is already considered a relatively large learning curve.
Taking on Risk
Younger investors typically have the ability to take on more risk than older investors. They have more time to recover and learn from their mistakes, as well as more time to play with short-term, high-volatility investments. While most investors well into adulthood prefer stable long-term investments, young investors can try out riskier investments and improve on their strategy over many years. If you’re a first-time investor close to retirement, you won’t have time to lose money and learn from your mistakes. Young investors do have that luxury. While it’s never a goal to lose money or take on unnecessary risk, investing young allows you to do both without jeopardizing your future.
Future Quality of Life
Investing young allows you to grow your wealth surprisingly quickly. As discussed above, a $10,000 investment at 5% interest held for 40 years will yield roughly $70,000. And that doesn’t even account for the potential for above-average returns. Investing a certain percentage of your paycheck each week, or salary each year will allow you to build a large nest egg for the future. Putting away a little money now will allow you to take out a lot many years down the line. Like starting a savings account young, investing young can give you financial flexibility in retirement, financial security to start a family, or just a higher quality of life than you would have otherwise been able to afford. While it may sound like you need a lot to start investing early, there are online investment advisors, like Coinberies, that don’t require a minimum investment. At Levcrypto, we have helped many young investors start cryptocurrency portfolios and put themselves on the track for a better financial future. Without prior experience or knowledge, we can help you become a confident, skilled investor at any stage in life.