In investing, time is money, and yet most people don’t start investing until later in life, usually when they’re closer to retirement.
Those who can start investing earlier in life often have a tremendous advantage. While younger investors may not have a lot of extra money to invest in their 20s or 30s, they do have another valuable asset, and that’s time. And investing can help younger investors turn time into money.
How investing can turn time into money
Investing can help you start to build wealth, but the real gains often come from compounding. Simply put, compounding is the growth of not only your principal, but also of the interest and gains on your principal. This can really add up over many years, as the experiences of two young investors shows.
Elizabeth started when she was 19 years old, a time when few of her peers were thinking about investing. She contributed $2,000 a year for eight straight years from age 19 to 27, and then she stopped investing all together. Even though she didn’t invest any more money after age 27, she kept her $16,000 nest egg invested, and by the time she turned 65, her $16,000 had grown to more than $427,000.
Leslie, on the other hand, didn’t start investing until she was 30 years old and she had landed a steady job. She diligently put $2,000 a year into her retirement account for the next 36 years. By age 65, she had contributed a total of $72,000 and this grew to a little under $375,000.
Even though Leslie invested four times as much money as Elizabeth, she ends up with less money for retirement. How? The answer is time: because Leslie started investing later in life, she missed the opportunity to compound gains on 11 years of growth and contributions. (This example assumes a constant 8% return for both Elizabeth and Leslie.)
The lesson here is that all things being equal, investing earlier in life can really help you get ahead.
This is just one example of the extraordinary power of compounding, and we hope you’ll share it with the young people in your life to encourage them to start investing as soon as they can. You probably already know how rewarding it can be to build wealth; now you have the opportunity to see how satisfying it can be to help others do the same.
You don’t need a lot of money to start investing now.
The FundX Funds are designed for smaller accounts. With the FundX Upgrader Funds, you’ll own a professionally managed portfolio of funds for as little as $1,000.
You don’t have to worry about which stock or bond funds to own now. We’ll do that for you. We work diligently to keep your fund portfolio on track, even when markets change.
How to Invest
You’ll find the FundX Funds at most major brokers, like Charles Schwab and Fidelity, usually for no transaction fee. You can also invest directly with our shareholder services. Set up an account online here or call 1-866-455-3863 to get started.