3 Reasons To Start Investing... NOW!
Jasvind Singh, Assistant Manager
Published On: 17 February 2017 | 4:00 PM
Ever heard the words of Albert Einstein, “Compound interest is the 8th wonder of the world. He who understands it, earns it… He who doesn’t… pays it.”?
Many of us wake up in the morning, wondering when we will be rich, how we will be rich and if we can retire tomorrow, sit by a beach and sip some sangria. We then go to school or work, spend the whole day, jump back in bed and repeat the cycle the next morning. Well, guess what, nothing changes until we take some action! I’m not saying investing will make you rich, but read on, you’ll find out.
Over the past year I have spent a great deal of time speaking to my parents, friends and colleagues on why they do not invest their money in the stock market and almost 90% of the time I get the same answer; “Investing is risky!”, “Investing is only for those who are good at it!”, “I’m scared to lose my money!”, and best of all, “I’ll give you some money and you help me invest?”
It brings me back to a time when I was in my early 20s, when I too had the same thinking. My fears were aroused by all the “Don’t get fool by Get Rich Schemes” shown on TV. I remember while growing up, my parents kept saying, “there is no easy way to earn money besides hard work.” Reality is we fail to educate ourselves on the importance of investing.
Reason No. 1: It is about the future, not present.
Investing, if viewed as a tool to get rich quickly, will always result in you losing money and walking out the room saying, “this is not for me!” Investing is about gaining financial freedom, a second or passive income. Let us face it that one-day, we’ll all have to retire. Question is will we be financially prepared to do it?
Besides savings in our CPF account, the money we’ve saved is all what we have to survive the rest of our lives and do what we want. So we better get serious about building that wealth, and if you’re wondering when the right time to do it is, the answer is NOW! There is a Chinese proverb that goes, “the best time to plant a tree was 20 years ago, the second best time is now.”
Reason No. 2: Stop thinking investment is risky, its not!
Saying investment is risky is just an excuse, the same reason as why you could not go to the gym today. Yes, you will need knowledge before you start investing but in the 21st century, almost all your brokers are there to help you. At least I know at PhillipCapital, we are Your Partner in Finance. Not sure how to start? We will guide you. But end of the day, the onus is on you to take the first step. Right from stocks trading to share builder’s plan where you invest little amounts in the stock of your preference every month, we have it all.
Reason No. 3: Remember Albert Einstein… Compound Interest
Yes, he was a genius. He saw things ordinary men like you and me could not see. He knew about compound interest in the early 1900s. It is 2017 now, and most of us are still struggling to understand it. Let us understand this once and for all.
Say you invest $5,000 today in a stock or commodity and that commodity gives you 5% annual return. At the end of year 1, you would have made $250 and have a total of $5250. If you do not withdraw the money and reinvest $5250 back, at the end of Year 2, you will have made $262.5. How sad, very little money right? Well, repeat that for the 25 years we will be working, and that $5,000 would have grown to $16,931.77. Shocked?!?!
Here’s when the naysayers come in. 5%? You sure I can make 5% return every year? Yes, I am sure and it is because the 5% is an average over the 25 years. Some years you lose some years you make. Take the Dow Jones Industrial Average for example, it was at 3810 points in 1995, today it’s at 20,500 points. That’s a 425% increase in 22 years.
More naysayers would now say how many stocks are like Dow Jones? I say many, many more. The DOW has 30 constituents. S&P 500 has 500 of it. Apple was $1.35 in 1995, $0.82 in 1996 and $128 today. You know, that’s about 9381% increase in 22years! You did lose money at the start but the future is what matters. If you invested $5,000 in Apple in 1995, that would be worth $468,984.95 today. And that’s just a rough calculation. If we include all the corporate actions and stock splits the figure is much higher.
REST IN PEACE MR. EINSTEIN. YOU’RE TRULY A GENIUS!
GIF Source: GIPHY
That’s all for now folks. I will leave you all with the following video by Jay Shetty, “Why We Should Never Stop Learning”
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