“When is the best time to start investing?” We hear this question a lot from people who are in the early stages of learning about investing. It’s a perfectly valid question, so we put it to members of our investing team to discuss.
RYAN: Scott, when is the best time to start investing?
SCOTT: Ryan, Warren Buffett, who is the world’s most successful and best known investor, started investing at 11. He said his biggest regret, was he didn’t start earlier, which of course is a bit of Warren Buffett, folksy wisdom/humor.
The best time to start would have been 10 years ago. The value of compounding means the longer you can invest for, the longer you can make your investment horizon. The earlier you start AND the later you leave it, the more money you’re gonna have. That’s just the maths of it. So that’s the best time to start.
The second best time is today, because if you haven’t yet started or you haven’t put enough aside, you can’t change the past. What you can change is the future. And without sounding too kind of corny and Hallmark gift card or greeting card, the future starts today. And so if you think about the value of waiting another year, another two years, another five years, you might only get a small return between now and say 2025. Those same five years is the back end of your investing career? That could cost you the best part of kind of half of your potential investment by waiting another five years. Now, if you don’t feel it now, you’ll feel it then, and so basically it costs you five years worth of retiring a bit earlier, or five years of compounding even more wealth, whether you wanna spend it, give it to kids, give it to charity, use it to fund a lifestyle… start today. Today’s always, always, always the best time to start, the best time to add your investment portfolio.
RYAN: So the message to take away is then that, if I’m a 20 year old starting investing today, that is the best thing to do. If I’m 30 or 40 years old, it’s not too late for me.
SCOTT: Correct, if you’re 55 it’s still not too late. You will limit the amount of compound returns you can get. But absolutely start as early as you possibly can, put aside whatever you can. It’s hard to think that far ahead. Like, if you’re 20 you’re thinking, well hang on, I’ll take you 45 years into the future. Like, I can’t even conceptualise that. I get it, I really get it.
So I’m just gonna ask our viewers, just trust me. If nothing else, just trust me on this one, this one thing. Please start investing right now. Your future self, I promise you, will thank you as will your kids and grandkids.
RYAN: And can you give me a rough sense, I guess, of how much the market actually is expected to return?
SCOTT: Yeah, so we we’re really careful with predictions because, as the legal eagles will tell us, there’s no, you know, past performance is no guarantee. What I will say is over the long term,over decades and literally more than a century now, the market has delivered an average about 10% a year, depending on what index, what start date. There’s some puts and takes, but call it 10%. That means you can double your money about every seven years. So again, do multiples of seven. If you can invest for 42 years, that’s six times your money’s gonna double. It’s 100 to 200 to 400, to 800, 1,600, 3,200 bucks from a hundred. That’s $3,100 of profit, and if you start with a thousand that’s $32,000, if you start with 10,000, $320,000, the value of that becomes phenomenal. If you can start today and add regularly.
RYAN: And the effect is obviously going to be a whole lot better if the market can return that much compared to stashing it in a bank account, at the current rates.
SCOTT: I think sometimes not taking enough risk is the biggest risk you take.
RYAN: Absolutely, thanks Scott.
SCOTT: Thanks Ryan.