One of the worst impression I had a few years ago when I just entered my twenties was that ‘Investments’ are supposed to be when you’re settled. This basically means you invest money after your 30s, when you have a stable job, possibly married and has responsibility to take care of. Twenties is all about having fun and living on the edge.
While some of it is true, most of it is not. What If I told you, that if you were to retire by the age of 50, and you invested $100 each month in let’s say a mutual fund stock that returns on average 15%, and let’s say you increase your investment capacity by 5% each year, then in two scenarios, one where you start investing from 20 years of age, and start investing from 30 years of age, the results would be tremendous? with the above scenarios, if you start investing from 30 years of your age until 50 years, your returns will be $198,119 ($106,850 with inflation adjusted) where as if you start investing from 20 years of your age, your returns when you turn 50 would be $966,306 ($353,613 with inflation adjusted).
That’s almost three times more money in 10 years. That’s the power of compounding. That’s how much difference time makes in investments, even if you start with $100. The plan is to keep investing consistently and let compounding do its magic. It needs habit, perseverance and determination.
If you are in your twenties, just like me, start investing today, that would be the best gift you can give to your future self. Start small and start fast. As Warren Buffet said “You don’t need to be a rocket scientist, investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ” You don’t have to be smart, you just have to be wise with your money.
Artwork: https://dribbble.com/shots/6549819-Moneyman
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