Predicting the constant changes in the value of investments is hard.
If not entirely impossible.
Yet, for some reason, we all try to pretend that we know what’s going to come next.
This is probably based in some irrational sub-human requirement to be the best, and the richest – in a primal attempt to come out on top.
Yet this, for the average investor, is a damning assumption.
There are, however, some reasons as to why now is a good time to invest, whether into the stock market, property, or other forms such as bonds.
1. Habits, the powerful compound interest of life
Anyone who understands finance probably has heard of the life-changing magic that is known as compound interest, and will want to know how to benefit from it.
The fact of the matter is that compound interest is active within our own lives, in the form of atomic habits.
These habits take up seconds in our daily lives, but in a lifetime can become a huge investment of time and pays massive dividends.
One such atomic habit is the habit of saving – and putting this money into drip-fed investments.
Let’s take an example, John and Lizzie both earn $25,000 each year. As they are both on tight budgets, their approaches to savings differ.
John is worried about his money – and believes that investment is just for the rich. Because he doesn’t have much spare cash, he saves $150 each month – and spends half of his annual savings on a nice holiday each year. The extra $900 gets tucked away nicely into a cash bank account – giving him a cushy $45,000 in retirement money.
By not having the habit of making investments, John is losing out massively.
Lizzie, knowing that you should always pay yourself first, chooses to put $150 aside each month, with $50 in investments and $100 cash. Over her 50-year working life, Lizzie has saved $30,000, but thanks to interest at 8%, her retirement fund is just short of $400,000.
In addition, she has the $60,000 in cash saved gradually during her working life.
That’s certainly plenty for a retirement fund.
The difference between these two examples is not in their income – nor in the amount of money they save.
Rather Lizzie has made the remarkable and sensible decision of drip-feeding her investments, trusting the process and letting her money grow.
By her faith in investments, Lizzie has become rich.
2. No time like the present…
The best time to plant a tree was 20 years ago, the second best time is now.
Chinese Proverb
This quote, whilst common in the modern day and age, is one of my favourites.
Not only does it remind us the honest truth that the earlier the better, but rather we learn to understand that there’s no time like the present.
The key message which I want to highlight within this quote, is that it is impossible to know the future, and as with many things in life, the key is to start.
Investments will always go up and down.
That’s a fact of life.
Similarly, by investing over a long time period, regularly, and sensibly, we can mitigate these stock market changes and grow our money.
If you don’t start your investments now, you will always wait for a ‘better time’ – and in 10, 20 years down the line, you’ll regret it.
So, the key thing is to invest now – before it’s too late, and you’re guaranteed to have the wrong time.
3. The market is down
While a more specific reason as to why you should invest now – coronavirus and the damages of lockdown have made huge benefits for traders.
With the biggest market drops in years all occurring in the last few months – the market is primed for growth.
Whilst it has gained a large percentage of its value back – the stock market is still primed for growth and help your savings massively in the long term.
4. Your freedom is at stake
While perhaps a dramatized description of an actual turn of events, there is core truth in the argument that by not investing you’re reducing your freedom.
Financial freedom.
Through solid investments and payouts, whether in rent, interest or dividends, it is possible to leave your reliance on a day job.
This can be a massive help in terms of reducing stress, allowing freedom of movement continually – i.e. constant travel – and boosting quality of life.
What’s not to love?
5. Practice makes perfect
While nobody (except maybe Warren Buffett) is a perfect investor.
You will always make mistakes, have ups and downs, and that’s fine. Normal, even.
If you don’t make mistakes, it is impossible to learn.
As time goes on and your money grows, your decisions become more and more vital to the success of your investments.
That means that now is the time to make mistakes – and learn.
I don’t know about you, but I’d rather lose half my savings in my first year of investment than in my 40th. Losing 20 years of savings isn’t pretty.
In summary, there’s a large range of reasons for which we ought to invest now, taking advantage of time.
Time is one of the most important aspect of finances, and you don’t want to lose out.
There are, of course, two sides to every coin.
I really loved getting to work with you!