Why Now is the Best Time to Invest
“The best time to plant a tree was 20 years ago. The second best time is now.”—Chinese Proverb
The best time to start investing was yesterday, but the second best time is now.
Some people procrastinate on investing because they believe they aren’t wealthy enough to invest.
In fact, the habit of investing is a great way to become wealthy over time.
To be sure, many wealthy people got that way by starting investing at a young age.
In other words:
You should invest to become wealthy, not become wealthy and then invest.
“Preparation is everything. Noah did not start building the Ark when it was raining.”—Warren Buffett
Time and Compound Returns
Investing early significantly increases your expected returns.
Because of the power of compound returns.
When you look at a stock market chart over 100 years, it becomes evident that the more years you have invested, the higher the probability of higher returns.
Take a look for yourself here:
S&P 500 Index – 90 Year Historical Chart
There are market downturns, but in the long-term, the stock market:
- Always goes up.
- Tends to go up exponentially.
Why? Because economic growth is exponential.
Economic growth is driven by factors such as population growth, technological advancements, and productivity gains, which contribute to the exponential nature of stock market growth over time.
With higher economic growth, companies have higher profits, which leads to higher stock prices.
Also, your initial investment, along with any interest or dividends earned, continues to grow and generate additional returns over time, which is compound returns.
The exponential growth really kicks in if you stay invested for the long-term.
Fear of a Market Crash
You may be hesitant to start investing, because you fear an imminent stock market crash.
After all, if you are even a casual observer of economic news, you may hear about worries and fear about a recession or crash.
However, if you have a long time horizon, short-term market fluctuations are less concerning.
This is particularly true for young people who are just beginning their investment journey.
Consider the more likely risk of the market continuing to rise while you remain uninvested.
By not participating in the market, you miss out on the opportunity for growth and long-term wealth accumulation.
Also, by using the common-sense strategy of dollar-cost averaging, you can avoid any poor market timing decisions.