The Best Time to Invest: It's Not What You Think
The question of "when" to start investing is a common one, and many people believe there's a magic bullet answer. They wait for the perfect market conditions, hoping to jump in at the exact right moment. But the truth is, the best time to invest is actually much simpler: as soon as possible.
Here's why:
'Time in the Market' beats 'Timing the Market': Financial markets fluctuate, but history shows a long-term upward trend. By starting early, you ride out the inevitable ups and downs and benefit from compound interest. The longer your money's in the game, the more it can grow exponentially.
The Power of Compounding: Imagine your investment returns generating their own returns. That's the magic of compounding. The earlier you start, the more time your money has to snowball.
Let's say you invest $1,000 every year, starting at 25 and continuing until you're 65. With a hypothetical 7% annual return, you'd accumulate a much larger sum compared to someone who starts at 35.
Dollar-Cost Averaging: This strategy involves investing a fixed amount at regular intervals, regardless of the market's performance. This way, you buy more shares when prices are low and fewer when they're high, averaging out the cost per share over time.
Don't let market volatility discourage you.
While economic downturns can be scary, they're often temporary. By staying invested for the long term, you're more likely to weather the storms and come out ahead.
Here are some tips for getting started:
Do your research: Understand different investment options and choose ones that align with your risk tolerance and financial goals.
Start small: You don't need a huge sum to begin.
Invest consistently: Make investing a habit, like any other bill you pay.
Seek professional guidance: Consider consulting a financial advisor for personalized advice.
Remember, investing is a marathon, not a sprint.
By starting early and staying consistent, you're setting yourself up for financial success in the long run.
The above blog was written by Reid Mckenzie a financial adviser working for Mckenzie Financial Planning (www.mckfp.co.nz).
The above information is general in nature as is not meant to constitute personalised financial advice. Reid recommends seeking personalised financial advice from a registered financial adviser before making financial decisions.