Should You Invest Now, or Later?
Selfwealth
We'll get into the nitty gritty further down but for those of you who are time-poor, we're going to cut the preamble and get straight to the point.
These are the five biggest reasons you should invest now, with their most hard-hitting proof points are below
1. The article title is a bit of a fib; the best time to invest is yesterday
Warren Buffett became a billionaire in his 50s but amassed most of his $110+ billion USD in the last 20 years. That because time in the market beats timing the market thanks to a little thing called compound interest, the best investment strategy is to invest early.
2. Inflation will eat away at your savings
Without getting into financial jargon, inflation means that any money in your savings account today can't buy as much tomorrow. Every day you don't invest, your money dwindles.
3. you're already making a bad* investment choice
If you have money in your savings account, you've already made a choice: you've chosen to invest in cash at whatever low interest rate the bank is willing to offer.
4. you're already making a good* investment choice
OK not so much of a choice because it government mandated, but if you're earning money you're investing in superannuation. While this is a good choice, the average superannuation payout isn't enough to live off comfortably'.
5. Unlike a few years ago, it now ridiculously easy to start
These days, you don't have to pick stock. Thanks to the advent of ETF investing, you can park your money in a fund and investment elves will optimise it for you.
Still with us? That means your interest in compound interest is piqued, and you're open to investing for your future.
If you're like most people you haven't invested beyond your superannuation, and there a simple reason why: investing is about delayed gratification, and most people let today's good times roll regardless of tomorrow's financial hangover.
But you've delayed gratification before. You've hit the gym or hit the books or hit the nail on the head in terms of subscribing to email newsletters. Investing is no different. So, if you can delay another three minutes and two seconds of reading time, let us expand on the above points.
Time in the Market Beats Timing the Market
You don't have to be an investment wizard like Warren Buffett to experience big returns. Nothing in the investment space is promised some years the market is up and some years it down but over the last 10 years the average ASX return has been 9.3%.¹
Case study:
If you had invested $5000 in 2012, you'd now have $12,167. And that if you didn't touch it at all. If you topped up that investment with just $100 a month you'd now have $32,310.
Let say you got serious and upped the ante a little. You still start with $5000, but every month invest $380 (half the average Australian monthly savings amount²). Today, you'd have $83,486¦ That what Einstein was talking about when he called it the eighth wonder.
Whereas Investing Makes You Money, Inflation Eats at it
Compounding is great but it works both ways. You don't need to understand inflation or its causes to understand its effects, you just need to know it doesn't compound in the direction you want.
At the time of writing, Australia inflation rate is around 5%. You've seen the news: petrol up and an iceberg lettuce costs more than a pub lunch. we're not saying you shouldn't have money in the bank you should but inflation means that it going to be worth a lot less over time.
Case Study:
Let say, as opposed to the above, instead of investing that $5000 you left it in your savings account. If for whatever reason 10 years ago you were feeding a small army and wanted to spend that money at Coles, you'd be able to buy a comparable amount of snags and bread.
However, if we calculate using real inflation numbers from the last decade, today those snags and bread would cost you $6014. Your money has depreciated 20.3% and your $5000 is now worth $3985. Ouch.
Your Bad* Investment Choice
We hear you saying, but what about the interest rate from my long-term deposit savings account' and we say this: what about it??'. We repeat, you should have money in your savings account. There are going to be life events that need instant payment, and you don't want to have to sell off investments every time an unexpected cost arises.
However, if you're keeping your life savings in your bank account you're making a bad* investment choice. You've chosen to invest in cash, which historically has very low returns. These returns have never been lower than in the COVID era when the RBA dropped rates to fractions of a percent. And at current, those fractional increases aren't outpacing the rate of inflation.
Your Good* Investment Choice
Without any exaggeration, investing is so important to the fabric of our society it enforced by government. Every country in the developed world has a retirement scheme backed by drip-feeding investments over time. In Australia, we call it superannuation.
For those wondering why you should continue to invest beyond your super, the answer is simple: most superannuation aren't enough to retire on. And because of the wage gap, that issue is amplified if you're a woman.
The Australian government defines a comfortable' retirement wage at $45,962 per year. The average superannuation balance of a woman at 60 is $165,986. And if you're planning on enjoying your retirement for 20-odd years, well, the math doesn't add up.
Case study:
you're a primary school teacher in Victoria, earning the average wage of $63,346. You work from the age of 25 to 60, and your super is doing relatively well you've squirrelled away 10% every year and you've got $316,125.
We won'tassume the stock market chugs away at its 9.3% average. Maybe the market underperforms and returns an average of 7% over your 35-year working life. Every month, after educating our next generation of Einsteins, you're taking home $4247.
In this perfect (but conservative) world, investing 5% of your monthly pay would see you retire with an extra $381,842 or a total of $697,967. That still not enough to ball out in retirement but that assuming no savings, assets, house, spouse, or any of the other normal things old people seem to acquire.
Why it Easier than Ever
Back in the day investing was costly and niche. You'd need intel a broker and a load of cash. We democratised investing by being the first platform to introduce low-cost, flat fee brokerage.
Now, you don't need an excess of money or background knowledge. The most popular way to get started is with an ETF and you only need around $500 to begin.
You can create an online share trading account for free and be in the market in a matter of days. Doing so, you'll join over 120,000 Aussies who already use Selfwealth to invest over $9 billion in equities.
The best time to invest maybe yesterday, but we won't hold it against you if you start now.¹Source ²Source*All investment decisions carry risk. The context of a 'bad' or 'good' investment choice can only decide by you via consultation of a professional financial advisor.SelfWealth Ltd ACN 52 154 324 428 (Selfwealth) (Australian Financial Services Licence Number 421789). The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.
Important disclaimer: SelfWealth Ltd ABN 52 154 324 428 (“Selfwealth”) (AFSL 421789). The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser and/or accountant. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice. You should obtain the relevant Product Disclosure Statement for any product mentioned and consider its contents before making any decision.