The importance of starting to invest….NOW!
Albert Einstein once said, "Compound interest is the 8th wonder of the world. He who understands it, earns it...he who doesn't...pays it." The beauty of compounding is that interest accumulates interest. And the interest on the interest of the interest accumulates more interest! It never ends, and so the earlier someone begins to invest in life, the (much) better off they will be in the end. Let's look at an example: Sarah invests $10,000 in the stock market in her IRA at age 25 and Chloe invests the same $10,000 in her IRA, but at age 35. Let's assume they both retire at age 65 and both saw average annual returns of 9% during the time they were invested. What's the big deal between 30 or 40 years invested anyway!? Well, at age 65 Chloe has $133,000 to her name, while Sarah (little Miss early bird!) has $314,000 to hers. Isn't that amazing? Investing the exact same amount and capturing the exact same returns yields an extraordinary difference due to TIME. Sarah was invested for 25% longer than Chloe, but created 2.36 times the return. Boy does that worm taste good!
-Your Friends at Red Oak Financial Group