When you’re in college or just starting your career in your early 20s, investing may be the last thing you’re thinking about.
Unfortunately, what ends up happening is that a lot of people don’t start thinking about investing until it’s nearly too late. If you want the best chance of a successful investment strategy and a strong retirement, the younger you start investing the better.
The following are some of the primary advantages of enacting an investment strategy in your early 20s, or even before then.
When you’re young, you tend to be bolder and more willing to take a chance. That’s important in investing. You want a good combination of safe and riskier investments, and if you’re older, you’re less likely to go the risky route, despite the big potential payoff it can bring.
Whether it’s investing in emerging industries or learning about niche strategies like trading penny stocks, take advantage of your risk-taking attitude when you’re younger.
You Have a Longer Time Horizon
For most investors, having time on their side is one of the biggest assets they have. Younger investors have many years of earning potential ahead of them, which is and of itself an asset. In addition, even if there are downturns in the market or things don’t go as expected, there are many more years for younger investors to rebound from this.
This is why younger investors are advised to take more risk, while older investors have to be more conservative with their investments.
Aside from retirement, you’re just generally putting yourself ahead of your peers when you start investing early. You’re much more likely to be in a place of financial security when you start with a strong investment strategy from early on. You’re also learning good spending and financial habits when you’re young, often without even realizing it.
You Can Learn As You Go
Investing is a learning experience. Over time you can start to learn what works for you and what doesn’t. You can learn the fundamentals and then move into more advanced concepts. When you start out at a younger age, you have more opportunities to learn along the way and to create an evolved strategy.
If we’re going into the more technical reasons it’s better to invest early, compounding returns are at the top of the list. Compounding returns are one of the most powerful things you can have over time, and the earlier you start investing, the longer you’re going to have to grow your money.
If you set up an investment or retirement account and you deposit even a little money every week or month, you’re going to derive big benefits from compounding returns.
Finally, quality of life comes with investing early. When you know that you have money set aside and that you’re making smart, forward-thinking financial decisions, it can make you feel more confident in other areas of your life. You’re likely to feel a greater sense of control over everything in your life, and once you near retirement, you won’t have to feel like you’re in a panic.