Start investing early

Home » Knowledgebase » Investments » Investment Planning » Start investing early

When you are young you are more likely to be able put away what you need without having too much taken out of your income straight away, allowing you to build up wealth over time and earn more through compounding.

Compounding can be especially lucrative if it is left alone for long enough, which is why younger people should feel like they are making a positive investment decision by putting away money while they do not need it.

Investment returns over a lifetime

Starting your investment journey early is the key to most people’s future financial success. While the benefit of starting early may not be immediately evident, it can make all the difference to investment returns over a lifetime.

Whether you are looking to pay off a future mortgage more quickly, boost your retirement fund or provide financial security for your child’s future, investing could help you get there sooner.

More time to grow in value

The younger you are the better placed your investments are over the longer term to make up for any losses before your retirement. If you incur a loss, you have more time to make up for any investment loss. Whereas an investor who starts investing at a later stage in life, will have less time to recover their losses. So, with early investments, your investment gets more time to grow in value.

When your start investing at an early age you have a higher risk-taking ability than older investors. The older investors get they generally take a more conservative approach and prefer stability. The probability of achieving higher returns at a young age increase with a higher risk for return approach.

Selecting appropriate investments

Also having specific goals in mind is essential when it comes to selecting appropriate investments. Are you looking for short-term security or long-term gains? How much growth do you need to reach your goal? Answering questions like these will keep you focused on building a portfolio that’s right for you and your needs.

Having time on your side enables your investments to benefit from pound cost averaging. Investing at regular intervals is a good idea to help smooth out the ups and downs of investment markets over the long-term.

Smooth out the peaks and troughs

Timing the exact moment to enter or leave the market can be extremely difficult and investors inherently run the risk of investing at the top of a market cycle or exiting at the bottom. Pound cost averaging versus lump sum investing is one of the most important concepts in investing over the long-term.

Investing at regular intervals means that the average price you pay can be lower than if you had made one lump sum investment at the peak of the market. In other words, over time, regular investments can help smooth out the peaks and troughs.