Table of Contents
Why should you invest as soon as possible?
Because you harness the power of compound interest
Because you have more time to recover from losses
Because you avoid the opportunity cost of having your money idle
Because it is more tax efficient
The big difference: because investing as soon as possible means greater capital in the long term
The hardest part is taking the first step.
Why should you invest as soon as possible?
There are several reasons why you should invest as soon as possible. Below we explain some of the most important ones.
Because you harness the power of compound interest
Compound interest is a financial mathematics formula in which the return obtained from an investment is added to the capital from the previous period to generate more returns, so that the capital grows exponentially, and not linearly.
Mathematically, the function is as follows:
Final capital = Initial capital x (1+i)^n
Where i is the interest rate in percentage, and n is the number of years of the investment.
In fact, compound interest allows the result of an investment to be multiplied, especially the longer the term of an investment.
That's why the power of compound interest is the main reason to start investing as soon as possible.
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Because you have more time to recover from losses
If you are young, you can invest in higher risk products, which, after all, are the ones that provide the highest returns.
The reason is that you also have more time to recover ebay database from any losses, which, as the market has already shown on countless occasions, are more than likely to occur.
Because you avoid the opportunity cost of having your money idle
The most common situation in financial markets is bullish.
This has been demonstrated by history, where spectacular economic growth after the industrial revolution has dragged the stock market to the current situation, where the stock market is at historic highs.
Therefore, having your money outside of investments entails a certain opportunity cost, especially if you have your money stopped in fixed-term deposits or current accounts that, at present, do not earn any type of return.
The sooner you invest, the lower the opportunity cost you will have to assume.
Because it is more tax efficient
If you invest in certain products, such as investment funds or pension plans , the investment is more tax-efficient.
In fact, in the specific case of pension plans, since contributions are tax deductible, you will be able to save more money, something especially important when you are young, since you could even reinvest these savings to obtain more assets.
The big difference: because investing as soon as possible means greater capital in the long term
The numbers don't lie: investing as soon as possible can help you build a considerable fortune in the long term.
The differences are really significant, especially the longer the investment term.
For example, let's imagine that we have an initial investment of €10,000 at an annualized interest rate of 5%, in line with market profitability.
By maintaining the investment for 20 years, we will have obtained a total capital of €26,532.98.
But if the capital is maintained for 5 more years, the assets will be worth a total of €33,863.55. And if we hold on for 50 years, the capital will have become €114,674.00.
Year Capital
1 10.500,00 €
5 12.762,82 €
10 16.288,95 €
15 20.789,28 €
20 26.532,98 €
25 33.863,55 €
30 43.219,42 €
35 55.160,15 €
40 70.399,89 €
45 89.850,08 €
46 94.342,58 €
50 114.674,00 €
That is, if you invest €10,000 when you are 20 years old and withdraw it at 70, you will have obtained a total net worth of €114,674.00.
To put this into perspective, if you had invested 10 years later, the net worth you would have achieved would have been €70,399.89 under the same conditions.
The hardest part is taking the first step.
Actually, the hardest thing is to take the first step, especially when you are young and do not have the appropriate experience or knowledge. But there is nothing to worry about.
Thanks to inbestMe, you can start investing from a young age in a wide variety of products, such as index funds, pension plans or through Robo Advisors. In a simple and 100% online way.
Why invest? Because now you have no excuse to look to the future with a different perspective. With inbestMe, investing is in your hands.