Investing early as an entrepreneur will bring you a number of privileges that can assist you to reach your utmost financial goals sooner than you thought.
By starting to invest sooner, you will have more time to take advantage of compound growth and see your money grow at a faster rate.
In addition, investing early can help you take advantage of tax-deferred growth and potentially even earn tax-free returns.
The good news is if you are not sure where to start, there are a number of resources as well as guides that can help you along the way.
Sure when it comes to the idea of investing, there is no single path because what works for one may not work for anyone. The best way to find out what works for you is to examine and learn as you go.
And in this blog post, we are going to take a look at The Benefits of Investing Early, and Why You Should Start Now. So, stay tuned!
Why is Investing Early Important?
Investing early in your entrepreneurial career can have a number of benefits. For one, you’ll have more time to let your investments grow through strengthening startup ideas.
If you start investing at age 25, you’ll have around 40 years or so before you retire. That’s a long time for your hard-earned money to grow!
Investing early will also help you become a multi-millionaire sooner.
In fact, if you start investing just $5,000 a year and earn an annual return of 8%, you’ll be a millionaire in 34 years. But if you wait until say age 35 to start investing, it will take you 43 years to reach millionaire status.
So, if you’re dreaming of becoming a millionaire sooner, investing early is the way to go. Even if your goal isn’t to become a millionaire, investing early can still help.
The Benefits of Investing Early
The following are the major benefits you`ll get from an early investment:
The Earlier you Start, the more time your Money has to Grow.
The earlier you kick off with investing, the more your capital has to grow. This is because of the power of compounding, which is when your money earns interest on top of the interest it has already earned.
The longer your money is invested, the more time it has to grow and compound, which can lead to a significant increase in your overall wealth.
To take the edge of the power of compounding, however, you should start investing as early as possible.
Even if you can only manage to invest a very slight portion of money each month, the sooner you start, the better.
Over time, your small investments will add up and can potentially provide you with a large nest egg that you can use in retirement or for other financial goals.
Not already investing in your future? Well, now is the time to start. The sooner you sow the seeds of an investment, the more time your money has to double, or even triple down the line.
Compounding Interest.
The idea of Compounding interest is one of the main reasons to get started investing early on or too soon. But what exactly is compounding interest? And how can it benefit you?
Simply put, compounding interest is defined as earning interest on your first investment, and then earning interest on that interest again. This can cause your investment to grow at an exponential rate, particularly over a long period of time.
For example, say you invest $10,000 dollars at an interest rate growth of 6%. From this initial investment, after one year, you will hopefully have earned $600 in interest.
But by the end of the second year, you will not only earn interest on your original $10,000 investment but also on the $600. In other terms, you will earn a total of $1236 in interest in the second year.
In the third year, you will earn interest on your original investment, plus the $600 and $36. Very fruitful, right?
Investing Early allows you to take more Risks.
Investing early in your entrepreneurial journey allows you to take more risks and explore different investment strategies out there.
Thus, you can afford to invest in more riskier ventures, such as penny stocks, new companies, etc. Nonetheless, to minimize your risks down the road, you have to always diversify your portfolio.
While you may not have as much money to invest, you have time on your side when you are younger. Meaning, that if you make a few bad investment choices, you will still have time to recover.
If you wait until later in your career to start investing, you will have less time to recover from any losses and the like.
That is why it is important to start investing early so that you can take more risks and still have time to make up for any mistakes along the way.
What are you waiting for? — Get started today and start investing in your future! You won’t regret it.
You will have more Earning Potential.
When you invest early in your career as an entrepreneur, you will have more earning potential than if you wait until later in your career to start investing.
The above result is because the earlier you start to invest, the more time your investments have to grow faster, so it will generate recurring revenue (RR) for you.
For example, if you start investing $100 per month in a tax-deferred retirement account when you are 25 years old and continue investing the same amount each month, you will have $1 million in your account when you retire at age 65.
However, if you wait until you are 35 years old to start investing, you will only have $500,000 in your account at retirement.
In addition, by investing early, you can get the privilege of the dollar-cost averaging strategy. And this dollar-cost averaging strategy can help to reduce your overall investment risk.
So if you’re looking to dramatically maximize your earnings potential, consider investing early in your career path. The sooner you start, the more you stand to gain financial stability.
You will be able to Retire Earlier.
By investing early in your one and only life, you put yourself in a position to retire as early as possible.
Though if you can manage to invest a fine amount of your income, it will still be beneficial. The reason is simple: the more time your investments will have to grow once you start investing early.
For more in-depth, here are a few reasons to invest earlier as an entrepreneur:
– First, you’ll have more time to compound your returns. In the case of compounding your interest returns, the sooner one starts investing, the longer his/her money has to flourish.
– Second, you may be able to take advantage of and benefits of employer-matched retirement contributions.
If your employer offers a 401(k) or other retirement plans with matching contributions, the sooner you start contributing, the more matching funds you’ll receive.
– Third, the sooner you start saving for your future retirement (remember those old ages?), the less you’ll need to save year after year or based on your strategy.
If you start saving at age 25, you may only need to save 10% of your income to retire by age 65. However, if you start saving at age 35, you may need to save twice as much.
In a nutshell, investing early will also allow you to take more risk — which is the basis for entrepreneurs. As a result, you will have more time to recover from any unexpected losses ahead.
It’s true that when you are younger, you can afford to take more risks because you have time on your side.
How to Get Started Investing Early
Investing early is one of the best ways to secure your financial future.
By investing early, you give your investments more time to grow, which can lead to a larger return on your investment.
And, if you start investing early, you may be able to take advantage of compound interest, which can further boost your earnings and lead you to entrepreneurship.
Of course, it’s also very crucial to do your ultimate analysis first and understand the risks associated with investing ahead of time.
But once you’re ready to start, there are a few simple steps you can take to get started investing early.
To start with, you’ll need to choose what type of investment you are targeting. There are many different options available, including stocks, bonds, and mutual funds.
After you’ve concluded the type of investment you want to make, now, you’ll need to open an account with a broker or an investment firm.
Conclusion
Investing early, as an entrepreneur, has a number of benefits. It allows you to take advantage of compounding, which is the tendency for investments to grow at an ever-increasing rate.
This life-changing habit also gives you more time to take advantage of market fluctuations and grow your portfolio as much as possible.
And finally, early investing allows you to take the benefits of what we call the power of compound interest. For these reasons, investing early is one of the smartest strategies you can implement.
Over time, once you get the hang of it, you will develop your own unique investing choice or type and learn what works out best for you.
So, don’t wait – the sooner you start investing, the sooner you can reach your entrepreneurial and financial goals in the shortest time possible. Best of luck!
Robel Birhanu
Robel Birhanu is a digital marketer and the founder of the Online Money Spinner blog. As a young entrepreneur, he loves sharing his knowledge with others. Online Money Spinner (Robel’s website) is all about ways to make money online, tips and tricks for online marketing, and how to start and grow an online business.
