Wednesday, February 10, 2016

Don’t Wait to Begin Investing

Thomas Bruni @BruniCharting  had a excellent tweet on the difference between investing and trading:

“As a trader/analyst I don't like equities.

As an investor, I'm buying stocks next week, month, year, decade, etc. Know your timeframe/goals”

I started thinking about some of the reasons why people delay investing.  I ran the numbers on what happens if you delay investing because you don’t like the market.

Let’s take a 30 year time frame.   A $4,000 annual investment at a modest 6% return awards you with $339,206 at the end of 30 years. 

If you don’t like this market and spend the money this year money instead of investing it, your payout drops to $316,232.  Postpone investing by five years?  Now your nest egg is down to $236,625.  Spending $20,000 now costs you $100,000 down the road. 

But you don’t the market?  You think maybe a bear market is coming next year?  It doesn’t matter.  If you put your $4,000 in the market and the market drops 20% this year, your fund is worth $333,572 after 30 years.  The 6% annual increase over 29 years more than makes up for one bad year now.

Hey, it’s your money, use it however makes you happy.  But I think you’ll be a lot happier if you have more of it to throw around later when you need it.

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