We all want to retire comfortably. To make sure you have sufficient funds to support your retirement and to have extra money to enjoy yourself such as for travelling, it’s best to invest early to save for retirement. Here’s why.
1. Power of compounding
The power of compounding is one of the biggest advantages of starting to invest early. Start young! By getting a headstart, your investments will have more time to grow. The gains from your investments, such as from property investment, can then be reinvested to generate even more gains over time. The key is to maintain a long-term view.
2. More time to recover from market fluctuations
Investing early means you have more time to recover from any fluctuations in the market. The stock or bond market is filled with peaks and troughs. Even if the stock or property market is performing well and generating positive returns, that doesn’t mean it is immune to volatility. Similarly, the property market will also experience ups and downs, usually in tandem with economy. If a property bubble is building, this increases the chances of a correction happening.
Investing involves taking on some risks. So, by starting your investment journey early, you will have more time to ride out any fluctuations and to recover from any temporary losses.
3. Ability to take on more risk
When you embark on your investing journey earlier on in life, as opposed to closer to retirement age, you can afford to take bigger risks in exchange for potentially higher returns. Of course, this also comes with the possibility of higher volatility. But because you have started early, you have a longer runway to make larger gains or to recover from any potential losses.
However, as you get closer to retirement, you will have to adjust your investment portfolio to reduce risk and preserve capital.
4. Building good investing habits
Starting to invest early can help you to develop good investing habits. This will set you on the path to regularly saving and investing a portion of your income. These habits come in handy to help you build a strong financial foundation, putting you on track to long-term financial success and to meet your financial goals.
5. Meet your retirement goals
By starting early, you also have a greater chance of building up a sizeable nest egg and meeting your retirement goals. Whether it’s achieving a certain level of financial security such as by earning passive income from property rental or from dividends from dividend-paying stocks, starting early gives you a better chance of achieving your financial goals in the long run.