Invest Now vs. Invest Later? (4 things to know)

^{Read time - 4 minutes / Disclosure} 

 

Knowing when to start investing can:

- Give you clarity.

- Give you confidence.

- Help motivate you to get started.

Unfortunately, investing can be an easy thing to put off.

 

The Timing

 

According to Fidelity Investments, common reasons people put off investing include:

- Waiting until they learn everything to feel confident.

- Waiting until they have more money to invest.

- Waiting for the exact right time to start.

There's many reasons to delay investing.

Especially when you see things in the news like this:

 

 

Or this:

 

 

But the truth is.

Since both of those articles ran a year ago..

The stock market is up 20%+.

 

^{The Stock Market (past year)}

Like it was last week, I remember working in The Oaks Mall just outside of Los Angeles, California.

It was my early 20s.

And I was hired by AT&T to work as a cell phone salesman at a little phone cart inside the mall (10 years before I started working in finance).

It was a fun job in my 20s.

Spotting celebrities in the mall like Hulk Hogan, Will Smith and others was interesting.

It was also the year I started investing.

 

My manager pointed out using a retirement account like a 401k to invest was an employee perk worth considering.

After paying for food, my car payment and the tiny room I was renting inside someone else's house..

There wasn't much money left over.

Deciding to invest felt like a huge decision at the time.

And I didn't know much about the stock market.

Or if it was even a good time to start.

 

So I read a few books on investing.

And learned the stock market has been going up 10% per year on average for the past 30 years.

And learned I didn't need to pick individual stocks to buy, I could just buy an S&P500 fund instead which is made up of the top 500 largest companies in America (and most retirement accounts offer this).

So I ran a few experiments to help me decide if I should start investing in my 20s or start investing later in life when I was making more money.

And the results were shocking.

 

 

The "Investor Age" Experiment

 

Deciding when to start investing can be hard.

Especially when money is tight.

Running little experiments like this helped motivate me to get started which eventually led to $1M of investments.

 

But before starting, I imagined if the stock market continued to grow 10% per year on average and I wanted to have exactly $1M of investments at age 60.

How much would I need to invest if starting:

- At age 20?

- At age 30?

- At age 40?

- At age 50?

Let's dive in.

 

1. Starting at Age 20

 

Building $1M of investments from scratch meant:

- $180 invested per month.

- Into the S&P500.

- For 40 years.

And here's the math:

 

^Estimate

Investing $180 per month into the S&P500 growing 10% per year on average for 40 years worked out to: $1,007,029

 

2. Starting at Age 30

 

Building $1M of investments from scratch meant:

- $485 invested per month.

- Into the S&P500.

- For 30 years.

And here's the math:

 

^Estimate

Investing $485 per month into the S&P500 growing 10% per year on average for 30 years worked out to: $1,008,456

 

3. Starting at Age 40

 

Building $1M of investments from scratch meant:

- $1,385 invested per month.

- Into the S&P500.

- For 20 years.

And here's the math:

 

^Estimate

Investing $1,385 per month into the S&P500 growing 10% per year on average for 20 years worked out to: $1,002,721

 

NOTE:

One big thing I noticed if starting at age 40:

There were only 20 years left to invest.

And with the stock market going up 10% per year on average over the last 30 years.

I realized I didn't have a full 30 years to invest.

And might not average a 10% return per year (might make less money).

 

4. Starting at Age 50

 

Building $1M of investments from scratch meant:

- $4,965 invested per month.

- Into the S&P500.

- For 10 years.

And here's the math:

 

^Estimate

Investing $4,965 per month into the S&P500 growing 10% per year on average for 10 years worked out to: $1,000,236

 

NOTE:

One big thing I also noticed if starting at age 50:

There were only 10 years left to invest.

And with the stock market going up 10% per year on average over the last 30 years.

I also realized I didn't have a full 30 years to invest.

And might not average a 10% return per year (might make less money).

Plus, I might not feel comfortable putting all my money into the stock market if I had less than 10 years until retirement age.

 

The bottom line

 

Going from $0 to $1M in investments can feel impossible when starting from scratch.

It sure did to me in the beginning.

But running these little experiments gave me hope it was possible.

Although there's no guarantees in life when it comes to investing.

I figured even if ending with half that amount at retirement ($500,000)..

It was better than nothing.

 

The 2 biggest things I learned while running these experiments in my early 20s were:

#1: The best time I could have started to invest was: My very first job in my teens.

#2: The second best time I could have started to invest was: Today. The day I realized just how dang important it is.

If you're near the beginning or maybe the middle of your investing journey.

I hope sharing my little investing experiments are useful.

Here's a link to the free compound interest calculator above if you want to run your own investing experiments:

 ​For Apple.​

 ​For Android.​

That's all for today.

See you next Saturday.