“It takes drops of water to create an ocean.”
Why invest?
You work hard to make money! You do all you can to keep your expenses low so that you can save more money. Why do you have to do all the heavy lifting? The money that you save should be put into appropriate buckets that work extra hard for you to make you more money. That way you don’t have to depend on your job as the only source of income. How do you do that? One simple answer – “Start investing now!”
My start
I started my investing journey in 2006 when a colleague of mine introduced me to the world of mutual funds and investing. After some great discussions and a lot of online research, I bought my first mutual fund – VFINX (Vanguard 500 Index Fund). This is an index fund which mimics the performance of the S&P 500 index. A few more fund purchases, and I was sitting on a well-diversified portfolio of stock and bond based mutual funds.
Start early (if you can)
In investing, time is one of your best friends. Over long periods of time, say 30 yrs, the market (S&P 500 index) has returned approximately 10% average annual returns. If you start investing in your 20’s even with small amounts, you will gradually build a bigger nest egg which in turn will make you more money. This is the magic of compounding.
How much do you need to start?
You don’t need a ton of cash to start investing. When I started in 2006, I had to make an initial purchase of $1000 to $3000 to buy a new fund. These days you can buy index ETFs (Exchange Traded Funds) for the cost of one share. Ex: You can buy one share of VTI (Vanguard Total Stock Market ETF) for around $236 (as of Nov 26, 2021) and get instant exposure to the US total stock index.
Dollar Cost Averaging
Over the years, I have made several changes to my portfolio. I’ve added/dropped mutual funds/ETFs, converted MFs to ETF equivalents and bought/sold stocks. There’s one practice that’s remained constant over the past 15 yrs – I keep adding to my portfolio regularly irrespective of what the market is doing. There is a term for this called: ‘Dollar Cost Averaging’. Keep doing this for several years and you’ll be amazed at the amount of money the ‘Market Gods’ will help you accumulate.
Good habits
Patience and discipline are key to the success of your long-term portfolio. At times the market will go down and you will be tempted to sell and cut losses. My advice – stay in the game and continue to ‘dollar cost average‘. You will make crazy gains when the market bounces back.
The plan
Start early, start small, invest regularly, stay the course and watch that investment portfolio skyrocket!
Thanks for this article!
you’re welcome.
Everyone, especially young workers who are just starting out should read this article. They can start investing early and let the power of compounding grow their portfolio by leaps and bounds.
Yup, in investing, time is one of your best friends. If you start early, you can get away with making less contributions per month than someone else who starts later in life to achieve the same target amount at retirement.
Investing for the long term requires a lot of discipline but it surely pays off.
Many young people tend to postpone investing for retirement. The sooner they start, the less they have to contribute as opposed to someone who starts later to get the same target amt in retirement.
Many people don’t realize the greatness of compounding caused by starting early and making regular contributions.
I keep telling this to people all the time. Once you see the gains, you’ll stick to the plan!
I give the same advice to youngsters all the time. You got to see it to believe it.
When the market goes down, a lot of people forget the golden rules and sell in panic.
The power of compounding is simply amazing!
In investing, time is one of your best friends! More time = more compounding = more money in hand.
Bank savings accounts are useless. Invest in an index like the S&P 500.
And keep doing it regularly ex: every paycheck.