When is the BEST time to invest?

One of the biggest questions when it comes to investing in the stock market is when is the best time to start. Many people think that you need to time the market or wait for the right opportunity, but should you wait?

I did wonder this myself when I started my investment journey about a year ago and wanted to share what my findings were with you.

Have you heard of the saying - the best time to invest was yesterday and the second best is today? Why is this?

The answer is sooner we can start investing, the more time we will have for the compound interest to grow our money and the less we would need to invest overall.

Let me run you through an example 👉

• Person A 👩🏽‍🦰 starts investing at 25 years old and puts in £250 monthly into a stocks and shares ISA until they are 60. Assuming 7% inflation adjusted return, they would have £452,890. Out of this they only contributed £105,000.

• Person B 🧔🏻‍♂️ starts investing at 35 and puts in £450 monthly. At the age of 60 they would have £366,658 having had contributed £135,000.

Despite contributing £30,000 more than person A, person B has £86,232 less in the end. The lesson from this is the longer you stay invested in the market, the quicker your money compounds. The real magic happens later in the investing horizon when the figures start compounding at a much faster rate.

The earlier we can start, the better, but what if you, like me, found out about investing in your 30s or maybe even your 40s or 50s? We potentially have less time to invest and would need to contribute far more to achieve the same results than someone starting in their 20s.

Is it too late to start investing for us in this case? Should we even bother?

Not at all. 

As long as we have at least 5-10 years in the market, investing makes sense as we can make our money grow faster and benefit from the compound interest. Yes, we may need to contribute more and stay invested for a longer period, but it’s certainly worth it.

Now imagine person B decides to work until they are 65 and continue putting in £450 into their investment every month. They could have £552,189 at the age of 65. Or perhaps they get some raises and each year they can increase the investment number by 3%. They could end up with £754,585!

Many of us wish they could have started sooner, but reality is that we can start TODAY and make a big difference for our future.

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Have you ever wondered what ESG in investing stands for and is there a way to invest ethically? Katie goes deep into the subject on this brilliant episode about sustainable investing.

Until next time ✌️

Lina at Money Blues