The Perks of Being an Early Investor
Because basics of finance and investments aren’t taught in school, the word investing can seem scary for young Canadians. But with a little education and planning, it doesn’t have to be this way. Starting to invest early has a number of advantages and will put you in a much better place financially later on in life. Here are a few good reasons to start investing today so you can reap the rewards down the road.
1. Compound Interest
Compound interest is earning interest on top of interest already earned. If you place a single $1,000 into an investment at the age of 25 and earn an average of 8 percent per year, it will be worth over $23,000 by the time you’re 65. Factor in years of contributions and you can see how you can build some serious wealth.
2. Chance to Take Risks
As a young investor you can afford to take larger investment risks. You still have to perform your due diligence, of course, but if things go off the rails, you have the rest of your life to make back any losses.
3. Retirement Reality
Many Canadians won’t be in a position to retire. They simply won’t have enough money saved up to support them for the rest of their lives. If you asked them what they would do differently looking back, many seasoned investors would tell you they wish they had started investing earlier in life.
4. Reduce Volatility
The last economic recession may have felt similar to a roller coaster ride for many investors. Although this dip was significant, if you tracked investment returns over 40 years, there would be many peaks and valleys in the chart. Having a longer time horizon to invest helps smooth these extreme ups and downs and ride out a lot of market volatility.
Government assistance programs, while they are available today to help retirees, may not be there when retirement is close to a reality for you. Even if there are programs, the chances of them covering all your needs are slim to none. Having to rely on the government for retirement is not the ideal way to spend what are supposed to be the best years of your life.
While there are many more reasons why you should start investing as young as possible, these five are plenty to get you moving, and hopefully encourage you to come up with an action plan. Although there’s no such thing as a guaranteed investment, I can guarantee you’ll be glad you got started as early as you did.
Finance Guest Editor
Mitch Parker is the founder of MP Private Capital, a firm focused on aligning investors with quality, real estate-backed investment opportunities and developers with private funding. Educated in business and specializing in finance, Parker has attracted numerous clients who are tired of the ups and downs of inconsistent, traditional investment products. His conservative, level-headed approach has proven invaluable and key to his success.