why you must invest early?

Why you must Invest Early?

Why you must Invest Early?

Looking back...

When we were in our early adulthood, saving money is the last priority on my mind. Looking back at my early adulthood, I was more focus on my education, future career plans and most importantly my social life. I was living life as any other early 20 year old should be doing. Looking back I was happy and wouldn’t change it even if i could go back in time. One thing I regretted is not taking a part time job, which could have generated income for me to invest early.
 
All I should have done was to do 15 hours a week (2 shifts) and could have easily make £3,000 a year with two months off. This money could invest early into an investment portfolio passively with minimal life interruption.

The Reality

Between 21-25, I wanted to travel, party with my friends, buy nice clothes, watch live football games and hope to buy a nice car when i get my first professional pay check. There is completely nothing wrong with that plans. Work Hard, Play harder!
 
In 2000, I move to the United Kingdom at 19 for university and lived across from a HSBC bank. Dropped by the bank adviser on three separate occasions and still failed to invest any of my savings.  Hesitated due to lack of knowledge! I should have picked up the book, ‘The SnowBall effect’ by Alice Schroeder and ‘The Intelligent Investor’ by Benjamin Graham sooner (not at 35!). Warren Buffett himself became a millionaire before he was 30 and started invested since he was 11 years old. He bought shares of Cities Service at $38 a piece. 

One chart with the power of persuasion.

Now I would like to share a piece of crucial information which I can convince you to start investing at a very early age. This will literally blow you away!
 
If you plant your SEEDS early, you will sow the fruits at later stages. It is not easy trying to save a targeting amount every year. Our financial priorities changes as we get older with our commitments. Not everyone is the same but the end results for early investment seems to be similar.
Lets take two frictional character, ‘Smart Joe’ and ‘Chill Dan’.

Smart Joe

Smart Joe, always makes an effort to save up money through his part time work. Joe saves up £250 a month and invest passively in the stocks market £3,000 a year since 21. When he turns 30, he has other priorities such as buying a house, marriage, kids and perhaps starts a business with his savings. He no longer needs to put more cash after 30.

Chill Dan

Chill Dan, is a slightly late bloomer. He always believes he needs to get a good job before investing financially. All investments can wait at later stage in life. So he only officially started investing when he turn 31 working as a project engineer in a respectable Oil and Gas company. Very successful and respectable person in the industry.

why invest early

Results

At 31 Joe already have his wealth grown up to £57K with only £30k invested. At Age 55, Joe's wealth have grown to more than half a million! He already stop investing since age 30. On the other hand Dan is still topping up his investment yearly trying to catch Joe. At 55, he invested £75,000 and his overall portfolio is still sitting around £320k, which is £200k less than Joe!!! NOTE: In the calculations, I ignored financial crisis at various stages. This is simple because both character are investing in the same investment vehicle. A 10% assumption is very optimistic. Well do you know the S&P500 index have average 9-10% in the last 90 years

Conclusion

Many of us have missed this opportunity. We wished we could turn back time and drop £10k in Apple shares. However, you should not allow your kids to miss this opportunity. Read this article on how you can start saving for your kids in my Kids Investment series. I have personally started investment for my kids since they were 2 years old. Along the way, I will be educating them about amazing maths of compounding interest over time.

Honestly it is a-lot easier to invest for your children as a young age. It is far easier to select companies to invest in which would hopefully be around for the next 15-25 years. I already can easily name 3 (Disney, JNJ, Unilever). Can you name three good companies and leave your comments below for discussion?

From,

Dr Alex Koh
Founder and CEO of MooMooCoo.com
Family Finance Made Simple

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