Start your investment plan – now! Your future portfolio will thank you
“There’s no time like the present”, especially when it comes to investing. Young adults have a great advantage over other investors: time.
Compounding – The benefit of time is that is allows for interest to compound, which is the ability of an investment to grow by reinvesting earnings. Consider that a single $10,000 investment at age 20 would grow to over $70,000 by the time the investor becomes 60 years old (based on a 5% interest rate). By comparison, the same investment made at age 30 would yield about $43,000 by age 60, and made at age 40 would yield only $26,000. The longer money is put to work, the more wealth it can generate in the future.
Matches – If your employer offers an employer-sponsored retirement plan, like a 401(k), we suggest you enroll in their plan. Not only is savings made easy through automatic payroll deductions, but your contributions are made with pre-tax dollars. Additionally, many employers offer 401(k) matches, which means they will contribute money into your account. If you don’t take advantage of this benefit, then you are leaving money on the table.
Resources – Another advantage young people have is there are now, more than ever, many low-cost services available to make saving and investing easy.
- Consider the Acorns app. This app rounds up each transaction you make with your debit or credit card to the nearest dollar and invests the change into a diversified portfolio.
- Robinhood is another useful resource. This app offers commission-free trading of listed stocks and ETFs. They run a lean company which allows them to operate for less. They make their money by accruing interested on investors uninvested cash balances and through fees charged in their upgraded version. This is a low-cost means of entering the investment world.
- Check out Betterment.com, a robo-planner website for investing using ETFs that holds down fees. You use this to invest your taxable funds and your retirement plans, like IRAs.
- Also check out earthfolio.com, a robo-planner for investing “with a social conscience.”
Whichever form of investment you decide to take, the earlier you begin, the better. Start building your wealth now! See also: Young people, don’t let this happen to you. Plan for retirement now!
[As we have stated in past posts, we recommend investing passively, using ETFs or index funds, so you save fees. You can buy a diverse set of ETFs, set up your portfolio and sleep until you rebalance next year.]