Why You Should Start Investing as Early as Possible

As far as I’m concerned, it’s never too early to start investing and trading. It takes time for account balances to reach a meaningful level. This is why I strongly believe in starting to invest early, particularly in your 20s.

I completely understand why many young people tend to prioritise travel, leisure and smashed avocado on toast. However, I can’t stress enough the benefits of establishing a portfolio as young as possible. 

Want to know more about the benefits of investing early? Read on to discover why investing early should be a priority.

 

Leverage your financial freedom

 

Why invest early? Well, to start with, many young investors enjoy the perks of financial freedom later in life. Many investors and traders in their 40s have mortgages, families and lifestyles to fund. While younger investors in their 20s and 30s generally have far less financial responsibility. So long as they start young and are investing in great quality businesses and know how to manage risk. 

Starting early also means you’re more likely to have disposable income available to invest and trade.

A man using his laptop on the beach to start investing

 

Harness the power of compound interest

 

Compound interest is an immensely powerful thing. Instead of paying out interest or profit earned on your returns, earnings are added to your account allowing you to buy and trade larger sums. By reinvesting this money you’re continually building on your original figure.

Compound interest can be earned on basic savings accounts. However, the returns can potentially be higher when you invest in great quality businesses on the stock market.

I’ll finish with one of my favourite financial quotes of all time from Albert Einstein:

“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

 

Empower yourself with experience

 

A 40-year-old investor who’s been playing the market since they were 20 has far more edge than a 40-year-old investor who started when they were 38. In just 20 years I’ve managed to build a substantial wealth of knowledge. This has led to greater trading success, but I can assure you the learning curve was steep. The sooner you get started, the sooner you’ll create the opportunity and returns you are looking for.

 

Build risk tolerance

 

New investors generally have high levels of risk. Unfortunately, their knowledge of what to buy and sell is low, which hinders returns. The longer you’re in the market investing and trading the right companies, the higher your return opportunity and the lower the risk generally becomes. 

This is purely because you’ve had time to build solid gains that are unlikely to be whipped out if the market retraces. Quality over quantity is how you need to invest with outstanding risk management. 

Through experience, I’ve learned how to apply a risk to reward ratio of 1:2 or better on many of my trades. I can show you how with my free Intro to Trading course.

A scale showing reward outweighing risk

 

Take advantage of volatile markets

 

The COVID-19 pandemic has sent shockwaves through the global share market. While this has turned some investors off, I see it as an incredible opportunity for new traders and investors to claim their slice of the pie.

Of course, given the state of the market it’s important to know how and where to invest. That’s why I created the Trade the Turmoil webinar designed to get new investors and traders up and running with confidence and potential.

 

Enjoy financial freedom

 

Investing early allows you to potentially enjoy financial freedom sooner as well as later. It really is as simple as that. Why spend your whole life working, paying off a mortgage and saving rigorously for a holiday or new car? Instead, start investing early and give yourself a real opportunity for financial freedom.

While there’s no magic formula and always some level of risk, investing and trading is a wonderful way to build wealth and become financially independent sooner. 

Want to learn more about trading stocks? Register for my free Intro to Trading course for expert advice used by thousands of ordinary Australians.