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"A study of economics usually reveals that the best time to buy anything is last year."

- Marty Allen

With so many needs that command your attention every day, you may find yourself putting off tackling your long-term investment plan. But there is a compelling reason to start investing as soon as you can – the power of time.

By starting your investment plan now, you may be able to achieve the long-term results you’re seeking with just a fraction of the dollars you’d need to invest.

Value of a Head Start

Since financial markets fluctuate constantly, no matter when you begin funding your investment plan you can expect to see the value of your mutual funds rise and fall on an ongoing basis. But over time, the historical long-term trend of investments has been positive. In the stock market, for example, the S&P 500 has posted an average annual return over the past century and the past 50 years of about 11%.  Your returns could vary year-to-year, as past results are no guarantee of future returns.

There’s no clear advantage to putting off investing for the “perfect” moment to enter the market. But, there is a very powerful reason for starting right now – an early start could enable you to build a bigger portfolio at a fraction of the cost.

The chart shows the dramatic difference that early investing can make. If you began investing $100 a month right now and continued doing so for the next 10 years—and then never invested again—you could still earn more over the next 50 years than if you had waited 10 years to start, and then invested $100 a month for 40 years. Here’s the math:


The Value of a Head Start: Investing $100 per Month

Comparative long-term returns based on 7% average annual return with monthly compounding

Timeframe

If You Invest Now:
Total Investment

Account Value at End of Period

If You Start in 10 Years:
Total Investment

Account Value at End of Period

Years 0-10 $12,000 $17,409 $0 $0
Years 11-20 $0 $34,987 $12,000 $17,409
Years 21-30 $0 $70,312 $12,000 $52,396
Years 31-40 $0

$141,304

$12,000 $122,707
Years 41-50 $0 $283,973 $12,000 $264,012  
TOTAL $12,000 $283,973 $48,000 $264,012

This is a simplified, hypothetical example and does not consider any unique circumstances such as fees, withdrawals, or varying positive and negative performance potential among years.


A monthly investment of $100 over the next 10 years—a total of $12,000—would grow to $283,973 after 50 years, assuming an average annual return of 7%, net of fees. By contrast, waiting 10 years and then investing $100 a month for the next 40 years—$48,000 in all—would grow to just $264,012. In this example, that would be an extra $19,961 for the investor who started early.

In the real world, investment performance varies from year to year.  Also, in the real world, taxes could factor into the final results. It s important to remember that investing involves risks, including the possible loss of principal. All of your investment decisions should be made based on your specific financial needs, objectives, goals, time horizon and risk tolerance, which may change over time.

While the example shows the value of investing early, your potential to build wealth is even greater if you start early and continue investing throughout your earning years.

It’s never too late to start investing, but starting sooner may make reaching your financial goals considerably easier – and cheaper.

To quote an old Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.”

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