Investing early can be a powerful tool for building long-term wealth and achieving financial security. Whether you are just starting out in your career or are nearing retirement, there are numerous benefits to investing early that you need to know. Here are 8 benefits to consider when thinking about investing early:
The earlier you start investing, the longer your investments have to grow through the power of compounding. Compounding means that your investment earns returns, which then earn even more returns over time. This snowball effect can significantly increase your investment returns over time.
2. Time to Recover from Losses
Investing involves risk, and there is always the possibility of losing money. However, by investing early, you have more time to recover from any losses.
For example, if you invested M10,000 and experienced a 10% loss, you would have M9,000 left. But if you continue to invest and earn an average annual return of 7%, after five years your investment would be worth M12,594.05.
3. Building Long-Term Wealth
By investing early, you have more time to build long-term wealth. This can provide greater financial stability and flexibility in the future.
For example, let's say you start investing M200 a month at age 25 and earn an average annual return of 7%. By age 65, your investment would be worth M518,736. But if you waited until age 35 to start investing the same amount, your investment would only be worth M256,116 by age 65.
4. Starting Small
Investing early means you can start small and gradually build your portfolio over time. Even small amounts invested regularly can add up significantly over time.
For example, if you start investing M50 a month at age 25 and earn an average annual return of 7%, by age 65 your investment would be worth M129, 684. Even small amounts invested regularly can add up significantly over time.
5. Greater Flexibility in Retirement
By investing early and building a substantial retirement fund, you may be able to retire earlier than if you waited to start investing later in life. This can provide greater flexibility and freedom in retirement.
For example, if you start investing M500 a month at age 25 and earn an average annual return of 7%, you could have over M1 million by age 60, which could provide greater flexibility and freedom in retirement.
6. Achieving Financial Goals
Investing early can help you achieve your financial goals sooner. Whether you are saving for a down payment on a home or planning for retirement, investing early can help you reach your goals faster.
For example, if you are saving for a down payment on a home and need M100,000, if you start investing M1,000 a month at age 25 and earn an average annual return of 7%, you could reach your goal in just over 7 years (7 years and 8 Months)
7. Reducing Stress and Anxiety
Investing early and building a solid financial foundation can help reduce stress and anxiety around money. By knowing that you are on track to meet your financial goals, you can focus on other important aspects of your life without worrying about financial security.
For example, if you have a plan in place and know that you are on track to meet your financial goals, you can focus on other important aspects of your life without worrying about financial security.
8. Learning about Investing
Investing early provides an opportunity to learn about investing and build financial literacy. This can help you make more informed decisions about your investments and financial future.
For example, by researching different investment options and understanding the risks and rewards associated with each, you can make more informed decisions about your investments and financial future.
Conclusion
Investing early provides numerous benefits, including the power of compounding, time to recover from losses, building long-term wealth, and achieving financial goals. By starting early and being disciplined in your savings habits, you can take advantage of these benefits and set yourself up for a secure financial future.
