The answer to the question in the headline above is this; time. The best weapon that any investor, new or experienced, big or small, has, is time.
One of the reasons that time is so powerful is that, if you have plenty of it, you can sit on your investments when times are tough and the market is even tougher. Even better, you might even be able to take advantage of some stock prices that are bargain-basement while you’re waiting for the market’s upward trend to return.
Unfortunately, the vast majority of consumers in the United States don’t take advantage of time as well as they should, if at all. Less than 45% of people 29 years of age or younger don’t take advantage of a 401(k) or IRA for example.
Let’s take a look at some of the excuses that people have not putting time to work for them. Once you see them you’ll realize that all of them are fundamentally flawed.
Many people believe that the small amount of money that they have left over for investing won’t garner them enough money to make it worth their while. The fact is however that even small amounts of money invested over the course of 40 years can multiply from 20 to 50 times, which can turn even a small amount of money into a substantial amount of money. For example, putting $25 a month into an IRA and leaving it there for 40 years will net you $133,000.
Some people believe that it’s not a good time to invest right now but the fact is that there’s almost always a reason to not invest and, if you never do, you’ll never be able to take advantage of the time factor that we’re talking about right now. You’ll also certainly miss out on a whole bunch of profitable opportunities that might have become available if you would just stop making excuses. (No offense.)
Lastly there are those people who don’t want to think about investing, or retirement, because they’re “too young”. While we realize that it’s tough to think about retirement when you’re in your 20s, or even 30s, and there are other things to do like pay down student loan debt, start families and buy homes, starting as early as possible allows you to take full advantage of time’s excellent effects. We’ve talked about it many times here before and it bears repeating; compound interest is one of the best financial discoveries ever made.
Also, starting early sets you up for excellent financial habits that will definitely serve you well for all of your years. The fact is, putting aside a little bit of money now in order to get back a lot of money in the future is the most sound financial advice that you’ll ever receive, or could ever follow.