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Why Invest At A Young Age?

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Why Invest At A Young Age?

Most investors begin at a later age whether this is in their 30s, 40s, or even 50s.

While the saying, “better late than never” does apply with investing, it’s always smarter to start right now. Today is the best time to invest and being as young as possible does have advantages.

Let’s take a look at some of the key benefits associated with investing at a younger age.

Compound Returns

Let’s begin with the concept of compound returns

In essence, compound returns refer to the idea of earning money over a longer period of time. For example, let’s assume you invest $100,000 and expect to receive 7% returns every single year.

Well, the first year you will end up with $100,000 + 7%, which is $107,000. This is nice and if you were to take out your money right now, you would have made an additional $7,000.

By no means is this a bad return! However, if you take advantage of compound returns, you can reinvest the $7,000 and end up with more money to play with. In essence, you stay in the market and continue to reinvest the funds. This means, next year you will have $107,000 + 7% = $114,490.

As you can see, compound returns are amazing when you have 30-50 years left in the market!

Easier To Take Risks

It’s a lot easier to take risks when it comes to your investments. A person in their 50s may not want to invest in fast-moving stocks because they may plummet straight to $0. However, a younger person may like the high risk/high reward scenario and find it a good option for their timeline. This has to do with your younger age.

Even if the stock goes to $0, you will still have your main earning years ahead of you and that loss won’t even leave a dent in your overall portfolio!

Benefits Of Time

Sometimes, it’s as simple as having more time to work through a market. You want to be able to take advantage of new opportunities and this can only happen when you have the ability to invest while waiting around.

You will want things to grow and you will want to wait for new opportunities and that is where a younger person can take advantage.

In fact, this ties in with the previous advantage of taking risks. A person is able to take bigger risks because they have time on their side.

Improved Budgeting

Most people are reckless at a younger age and don’t understand or appreciate the value of saving money. This is something they learn with time but investing at a younger age will smarten you up quickly.

It’s a great way to not only make money but also learn the value of saving money in the right places. Even a simple understanding of budgeting can go a long way in improving your life over the long-term and shouldn’t be taken for granted. It is a game-changer for loads of younger investors as they hope to manage their money as wisely as possible.

Final Thoughts

Investing at a young age is one of the best decisions a person can make. Yes, investing might seem like a challenging proposition but it doesn’t have to be as long as the right steps are taken over the long-term. It’s important to have the right mindset before diving in headfirst. Even at a young age, the right mindset can go a long way in setting you up for the future!

Take a look at all of these benefits and get started as soon as you can.

About Me

Don Larson, CFP® is the owner and founder of Larson Wealth Management. Don started in the investment advisory industry in 1999 after he graduated from Arizona State University with a Bachelor of Science degree in Business Finance.

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