5 Reasons to Start Investing Now—Not Later
Published on September 1, 2017
There are plenty of reasons people don’t invest their money. Some of them are valid—for example, you probably shouldn’t invest a cent if you don’t have all of your high-interest credit card debt paid off. Or, if you’re planning to make a big purchase next year, you wouldn’t want to take the risk that comes with investing your savings.
But other reasons don’t quite make sense, and they’re often based on misconceptions about investing, or a lack of knowledge about the process. The truth is, if you have long-term financial goals, like buying a home, starting a business, or retiring someday, investing is likely to get you there far more quickly than saving alone. Here the most common reasons people drag their feet when it comes to investing—and why they might be holding you back.
1. “I’m saving money already—why should I invest?”
Savings accounts pay you interest—but not a lot. The average interest rate of the top five banks in the U.S. is only .08%, and the best rates out there hover around 1%. But, with the current inflation rate at 1.9%, all that money you’ve socked away in savings is actually losing money.
To put it in more practical terms, if you leave $10,000 in a savings account for the next 20 years, and you earn 1%, you’ll have about $12,200. The problem with that is, if inflation is currently at 2% (and it could easily be more in the future), that future $12,200 will only buy what $8,210 does today.
Yes, having money in savings is recommended for any cash you need to access immediately or don’t want to risk losing in the short-term. But for the rest of it? If you want it to grow, you’ll need to put it somewhere else.
2. “I’ll invest later, when I make more money.”
Let’s say you’re 25 years old and you hope to retire when you’re 65. (That may seem like forever, but ask any 65-year-old—it goes by in a flash.) If you save $5,500 a year and average 7% return per year (the average return on the S&P 500 from 1950-2009), you’d have a little over a million dollars.
If you wait until age 30 and do the same thing, you’d only have about $760,000. Start at age 40, and you’d only have about $348,000! If you’re reaching retirement age and want to have a million dollars before you retire, you’ll need to save much more each year to catch up to that goal.
Many people think that it’ll be easier to save more when they’re older and making more money. And even if that is true, know that the earlier you start investing, the more time you have to weather the ups and downs of the market. Which brings us to:
3. “I want to wait to time the market.”
It’s tempting to delay getting started because you think the market is too high, or you want to wait for stock prices to go down. The issue with that is, when the market does take a dip, most people fear it will go down more, so they continue to wait. Few professional investors even try to time the market, and even fewer succeed. In reality, people who do try to time the market tend to buy at or near market tops and sell at or near market lows.
4. “Investing my money is too risky.”
You might hear about the stock market going up or down by a number of points each day, and therefore assume it fluctuates too much for your taste. Market volatility is a reality, but there are ways to invest for every level of risk tolerance. Diversified retirement accounts, mutual funds, and ETFs, for example, all allow you to invest in a more safe, stable way while yielding a consistent return.
Yes, financial crises have happened and chances are, they’ll happen again. But when you take a long-term view of our history, those crises are blips on the timeline. Consider this: In the time period between 1929 and 2015 (when a whole lot of upswings and downturns happened!), a diversified portfolio of 70% stocks and 30% bonds averaged 9.1% per year. There is no guarantee you’ll make money investing, but if you hang in there and steadily save and invest, history has shown that over time you are more likely to succeed.
5. “Getting started is too intimidating.”
If you’re new to investing, it can be difficult to wrap your head around the concept. But the good news is, you don’t have to go at it alone.
A great place to start is investing for retirement in an employer-sponsored 401(k), an IRA, or (ideally) both. Once you’re contributing the maximum possible to both of those accounts ($18,000 per year and $5,500 per year in 2017, respectively), you can consider opening a brokerage account, which lets you invest in stocks, bonds, mutual funds, and Exchange Traded Funds (ETFs).
But you don’t even have to pick those investments yourself! A SoFi Wealth account makes it easy to get started. Our technology helps you set your financial goals and recommends the right investment strategy and level of risk to help you reach them within your desired time frame. And our SoFi Wealth advisors help you plan for your future and answer any questions you have—absolutely free.
The bottom line: Investing is not just for the wealthy; it’s for anyone who wants to work toward achieving financial goals. Sounds like you? Well, it’s time to get started.
Not sure what the right account or investment strategy is for you? SoFi Wealth advisors are available to offer you complimentary, personalized advice. Consider working with a SoFi Wealth advisor today.
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