Have you started investing yet or are you still not sure if it’s for you?
These days, there is no reason why anyone who is saving money shouldn’t be investing it. If you’ve even started thinking about it then there’s no better time to start than now.
In this post, I’ll reduce any fears and strip investing down to its simplest form so that you don’t wait as long as I did. Trust me, the longer you wait, the more you’ll regret it.
The two things that prevented me from investing in my early twenties were fear and perceived complexity.
You’ve worked hard, graduated and started your professional life. It’s all starting to pay off and you’ve got income rolling into your account every month, some of which you know you could be saving.
If this describes you in any way, then you’re about to receive some advice I lacked 10 years ago.
You should start investing now.
It doesn’t matter how little you have monthly to put away, the important thing is starting as early as possible. Starting when you’re 20 versus when you’re 30 could double your earnings by the time you are 50 years old. Let me explain.
If you were to invest £100 per month, starting at 20 years old and you did that until you were 50 with a growth rate of 5% (considered the average), you’d have about £82,000.
To get to this I used this investment calculator as shown in Fig 1.
£82k is nothing to frown at for stashing away £100 a month. The beauty of it though is that it’s only cost you £36k, the other £46k has come purely from investment growth.
Let me reiterate this. You’ve only saved £36,000 but you’ve ended up with almost £82,000. You’ve more than doubled your money.
Now let’s see what would happen if like me, you waited until you were 30 to start putting that £100 a month into investments. Fig 2 tells the sad story.
If you start when you’re 30, you obviously only have 20 years to invest until you’re 50. Doing this halves your output. You’ve contributed more than half of what you had before but made only £16k in investment growth instead of the £45k previously. That’s almost three times less!
Of course, all is not lost if you start at 30 years old. If you wanted £82k by the time you’re 50 then you’d have to double your monthly investment pot to £200. This is fine but means you’re footing a lot more of the bill, rather than having the money work for you. Starting earlier means you live by one of my mottos in life:
Work smarter not harder.
Now I can hear you shouting through your screen. This all sounds great but investing isn’t as simple as putting money away and hoping you get 5% return right? Wrong. It is this simple. Investing can be as passive as saving and in the next section I’ll show you how.
The Road to Passive Investments
You understand how investing can earn you a lot of money, especially if you start early and now you want to know how to do it.
Another stupid misconception I had about investing when I was younger was that you had to be active to do it. I thought you had to pick your own stocks, watch the market, predict crashes and ultimately, gamble. This is one hundred percent not the case.
Investing can be as passive as transferring money to a savings account. There are companies and even banks out there that provide “stocks and shares” accounts. You simply transfer a monthly amount into the account and they look after the investing.
There is usually some high-level management you can undertake, such as selecting how to spread your money between low, medium and high-risk investments but that’s it.
You transfer your savings into an investment account and someone else takes care of the hard bit.
Granted, they aren’t going to do this for free. When looking into the different companies that offer these services, make sure you look into their fees. Usually, this is a percentage of your yearly investments, so you want to weigh up this cost against the service they provide.
If you don't have the time or the expertise to actively tackle the stock market, then this approach is definitely the way forward. You let the experts take care of balancing your portfolio and you can still reap the benefits.
If you haven’t started yet, then get googling. Find the investment account that works for you and start your passive investment journey.
I have to add a little disclaimer here at the bottom. The stock market is by no means guaranteed to earn you anything and in fact, you can still lose money. Which is why if you’re going to do this, you should be in it for the long run. You should not base any investment decision solely on what I’ve published here.