The Early Bird Gets the Worm: The Benefits of Investing in the Stock Market Early
The stock market can be a scary place for most beginners, but it doesn’t have to be. That’s why you should consider investing in the stock market early on in your career—so you can take advantage of its benefits while they’re still available to you. Read on to learn more about what these benefits are and how to put them into action before it’s too late!
Why Investing Early is Important
If you’re a young investor, you have some big advantages over others who start investing later. For starters, a young portfolio is more likely to benefit from compounded growth. That’s because all dividends and gains generated by your investments are reinvested so that they generate further returns on their own. Essentially, as your portfolio grows, it grows even faster—which means that every dollar saved at an early age can add up to hundreds of thousands more for retirement or other major life goals down the road.
Picking Winning Companies from the Start
One of the easiest ways to invest early is by buying into companies before they go public. This allows you to enjoy all the upside of their future success without paying hefty fees or commissions. You also avoid any insider trading issues that may arise as a result. All you have to do is find early investors willing to take a chance on your company and get shares at a steep discount, which can pay off big down the road if your company goes on to become a major success. Of course, it’s impossible to know how your company will perform in five years, but if you’re going through all these steps, there must be some reason why people trust you enough with their money. If you think your business has what it takes to succeed, don’t let an opportunity like this pass you by.
Get In Before Everyone Else Does
The stock market is a lot like any other early-adopter trend. Start too late and you’ll be at a disadvantage; but catch it early enough and you can make plenty of money. If history has taught us anything, it’s that people usually have to be told to get into something before they do—that’s exactly what happened with eBay, Facebook, Google and Twitter. All these stocks were talked about as the next big thing for months before their prices skyrocketed. Which means if we could pinpoint what’s going to become big within months instead of years, we could all save a lot of time. To find out which stocks are likely to take off first, check out lists like 10 Stocks Wall Street Expects To Soar or 15 Hot New Tech Stocks. These lists are great because they pull together information from dozens of sources into one easy-to-read list. You might also want to check out analyst recommendations or newsletters that specialize in specific industries—they tend to offer up new ideas on how an industry will grow and who will benefit from it first. Once you find some companies that look promising, dig deeper by reading up on them (and their competitors) online using tools like Google Finance or Yahoo Finance. Just remember not to invest more than you can afford to lose!
Early Investments = Long-Term Returns
While no one wants to imagine themselves as a retiree living off their savings, it’s still important to plan ahead. If you are investing regularly, even if you don’t have much to invest at first, investing now means that your portfolio will grow over time and give you more control over your financial future. Those who start early can see even greater returns on their investments down the road thanks to time and compound interest. Compound interest is when you earn interest on your interest. It may sound complicated but it’s actually quite simple—when you invest money, that money earns interest and then some of that interest earns its own interest. Over time, compound interest can make a big difference in how much money you end up with! For example, let’s say you invested $100 today with an average annual return rate of 10%. In 20 years, your investment would be worth $1,814. But what if instead of starting 20 years from now (or later), you started today? You would end up with $2,908 after 20 years! That’s because your original investment was earning 10% per year for 20 years (the same amount) but since there was more capital there to begin with ($100 vs. $100), you earned $814 rather than just $414. Think about how much more comfortable retirement might feel if you had twice as much saved up!
Timing Your Investments Right
It’s important to understand that while many successful investors have varied investment strategies, there are three main approaches to investing. Some look for companies with high-growth potential and ride those investments as long as they can, others take a long-term approach and invest for stocks that pay dividends, and then there are day traders who are constantly buying and selling stocks. If you’re just starting out with investing, start by purchasing index funds; these funds track an entire market segment such as Standard & Poor’s 500 or Nasdaq 100 indexes—ensuring your investments aren’t too diversified or too concentrated.
Everything Has a Price
Although you might think that investing early will just cause you to miss out on all of those big market gains, that’s not necessarily true. There are plenty of ways to make money by investing sooner rather than later. For example, did you know that most mutual funds and other similar investment products charge a fee for investors who come onboard after a certain point? That means those people are paying for their gains! A good financial planner can help you learn about how many mutual funds charge entry fees and how much they cost, so you can avoid picking one that’ll cost more than it earns over time. Don’t let your fear of missing out keep you from getting started; instead, use your head and plan ahead.