When should you start investing?

One of the decisions that will typically flow from undertaking Money Planning is a decision to get your money and your equity working for you, generally through some form of investment.  One of the most important factors in the returns to be achieved from investing is time.  No matter what investment you choose, the longer you can hold it, the more it can grow in value.  Logically then, the earlier you start investing, the better the outcome that can be achieved by a given date.

At Empower Wealth, we have long emphasised the need to start investing as early as possible, as every day you delay means one day less that your investments have to grow in value.

One day might not sound like much, but consider this:

If you were to purchase a $500,000 investment which was growing in value at 7.2% per year compounding, then after ten years that investment would be worth $1,002,000.  If, however, you had been able to buy that investment one year earlier, it would have eleven years to grow in value, and it would be worth $1,074,000 at the end of that time.  That’s a total difference of $72,000, which represents an extra $200 for each day earlier that the investment was started.  Another way of looking at it is that delaying an investment could be costing $200 a day, $1,400 a week, or $6,000 a month.

I would certainly be very pleased if someone offered me an extra $6,000 a month for doing something I was planning to do anyway, but for doing it now instead of waiting until I had run out of excuses to delay.

It is clear from this example that if you delay investing by one year, you will miss out on one year’s growth in the value of the asset.

But the important thing to realise is that is not the first year’s growth that you’ll miss out on; it is the last year’s growth, which in this simple example is worth twice as much, because of the nature of compound growth.

So if Money Planning is so important (as we explained in our last Newsletter), and if starting early is the key to achieving a better outcome, why isn’t everyone doing it?

A study conducted late last year by AXA^[1] revealed that “… most Australians waited until they hit 55 to start retirement planning; which in many cases is too late.”  (Although the article focused on Money Planning for Retirement, rather than the Empower Wealth approach of Money Planning for all your future plans, the observations are still very relevant.)  The survey found that “… 73 per cent per cent of 55-60 year olds said they had started preparing for retirement but only 33 per cent of 31-36 year old Australians had started to prepare.”

AXA’s General Manager of Sales and Marketing; Adrian Emery said questions about retirement were a bit like the elephant in the room.  Everyone knows it’s there; they just want to pretend it doesn’t exist.  cs

So if you’re ready to acknowledge the presence of the elephant, and start thinking about how you are going to fund your lifestyle for the rest of your life, your need to get started with some Money Planning.  We’ll talk more about how to get started in future articles, but in the meantime, you are welcome to book a free one hour consultation with Empower Wealth, where we can demonstrate the range of tools we have developed to assist with this vital task.

P.S.  As I think you will have worked out, the answer to the question posed in the title of this article is YESTERDAY! Ok so if not yesterday then why not today?

[1]“Australians avoiding the retirement ‘elephant’ in the room” – AXA Media Centre