Why Investing $50 a Week Beats Waiting To Invest $500 Later
If you're waiting to invest because you think you need to earn more money, pay off debt or have a few hundred extra dollars sitting around first, you’re already missing out on growth. Waiting for the “perfect” moment to invest can cost people far more than starting small ever will.
Experts explained why investing $50 per week now, or any small variation, is a better prospect than investing $500, or a larger amount later.
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Invest Early, Invest Often
One of the biggest misconceptions about investing is that you need a large amount of money to get meaningful results.
Benjamin Huber, a certified financial planner (CFP) with Five Rivers Financial Advisors, LLC, shared a common phrase in financial circles, “Time in the market beats timing the market.” This means that it’s more important to get money invested when you have it than it is to wait and accumulate a lump sum before investing it all later.
“An investment that returns 10% in a year returns 10% whether there is $5,000 invested or $5 million invested,” he added.
Cody Schuiteboer, president and CEO of Best Interest Financial, reinforced this, saying, “Time … is the only resource that the early investor has more of than the delayed investor.”
Both experts agreed that consistency wins over big sums.
“Small can turn into big, but you have to get started first … and the sooner you get started, the easier it is to make that happen," Huber said.
Compound Growth Turns Small Investments Into Big Money
Early investing may not seem like much as the numbers are low, but growth accelerates the longer you stay invested as compounding does its work. In fact, Schuiteboer said almost all of the gains happen “during the last 10 years of an investment cycle.”
In real numbers, he explained that a 22-year-old person who stops spending $5 per day on coffee, four days per week, and puts this money in a fund could potentially “accumulate enough assets in his or her account to become a millionaire by the time he or she turns 62.”
Psychological Reasons People Delay Investing
Many readers know they should invest but still procrastinate. Huber said this may be more of a budget problem than anything. If people sit down and analyze their spending, he said, they “very often find things that are not necessary [that] could be diverted towards savings instead.”
Waiting to earn more is another common reason people fail to start, Schuiteboer said, as well as trying to find “an optimal fund, broker and account, which makes them procrastinate for months or even years.”
Automating Investments Makes Starting Easier
Huber suggested making it easy on yourself by automating investing.
“Automation … allows the investor to set it and forget it, and most importantly takes out the issue of forgetting to invest,” he said.
Some beginner-friendly investing vehicles include:
Employer 401(k) plans, especially when matching contributions are available
Roth IRAs
Broad index funds like VOO, VTI or FXAIX for diversification and low fees
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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