There is no better time than the present to start investing. Many people talk about and read about the ever impending recession or downturn in the stock market. But if you put that aside and zoom out over the last 5 years you will see that the stock market (looking at the SPDR S&P 500 ETF (SPY) that tracks the top 500 companies in the US has gone up nearly 57%.
Zooming further out to the max of 20 years, SPDR S&P 500 ETF has increased by 832%. This means that if you invested $10,000 into SPDR S&P 500 ETF back in 1993 and did not add another penny to that investment, then today your investment would now be worth approximately $93,000. Those are huge returns!
Let’s give you another example for why you should start investing into your retirement now. SPDR S&P 500 ETF Trust (SPY) has averaged about a 10% annual return since its inception. This means if you started with $0 and began investing $250 per month into SPY at the age of 20, then by the time you hit the age of 60 your investment will grow to approximately $1,500,000. That is nothing to shrug at either because it is a rather secure investment strategy that doesn’t take a lot of time or planning on your part, but it results in you having a great retirement account.
Assuming the same investment strategy above, let’s say you wait until 30 years old to start investing $250 into SPDR S&P 500 ETF Trust (SPY) and with the same average annual rate of return of 10% and retirement age of 60. Under this fact pattern the investor that waited 10 years to start investing will end up with approximately $565,000. That is $1 million less than the 20 year old that started their plan 10 years earlier and stuck with it. This is why I suggest to friends and family to start investing earlier because compound interest is your greatest ally, and that means you need start investing today to reap those gains!
My suggestion to anyone that will listen is to open up a ROTH IRA (income limitations apply – must not make more than $138,000) with your bank or an investment brokerage like Fidelity, Charles Schwab, Vanguard, etc. Once you set up your account, then find a way to initiate an automatic withdrawal monthly from you bank account – pick an amount that you can afford to invest without breaking your budget goals. From there you will have your investment account set up to automatically invest that money into an ETF like SPDR S&P 500 ETF Trust (SPY) on a fixed date every months (i.e. the 1st or 15th day of each month).
Once this is all set up, you get to sit back and relax knowing you don’t have to watch the stock market ups and downs to try and perfectly time buying or selling. Instead you are now doing an investment strategy that is called dollar cost averaging. By doing this investment strategy your portfolio is going to naturally ride the ups and downs of the stock market rollercoaster – you will be buying at various prices through out the year, and that is okay. The benefit to you is that you are a long-term investor and you now know that over the course of 20 or 30 years your portfolio is going to see substantial growth that you can use to retire.
Now of course there are other options outside of SPDR S&P 500 ETF Trust (SPY). You can invest in single stocks or other ETF’s that track various sectors of the stock market. The point is to do enough research so you feel comfortable knowing what your money is going to be doing over the next few decades – giving you confidence that you will be able to retire with some level of financial success. Don’t wait any longer, open up a ROTH IRA today and begin your investment journey!
Disclaimer: I do not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.