Why investing early is important

You can afford to take risks early on. Risk tolerance is the ability to withstand volatility in the market and still remain invested. There are ways for investors to go about taking risks early on without losing any money or sanity. The easiest of these methods involves dollar cost averaging, which is investing small amounts at regular intervals in order to smooth out returns over time.

Another method involves purchasing shares in a fund that matches your desired asset allocation. The earlier you start investing, the lower your risk will be. You can take advantage of compounding. Compounding is a powerful force. It would be magical. Five years ago, I began saving for retirement at age At this point in my life, I think back on all the times my parents told me to spend less and save more money. They advised me to put away a certain amount a month into a savings account so that someday I could afford things like cars and houses when they were no longer around to support me financially.

The one thing my parents never mentioned was investing—but if they had, maybe I would have started sooner! Bottom line Investing is the key to a secure financial future. Plus, investing early allows for compound interest over time so that each naira or dollar is worth more than it would be otherwise. Here is a visual representation of how consistently investing in a retirement portfolio early on makes a big difference over time.

The above example is for illustrative purposes only and not indicative of any investment. Source: J. Compounding is the increasing value of assets due to investment return earned on both principal and prior investment gains. Have access to an employer-sponsored retirement plan?

Take advantage of it as soon as you can. Access to higher risk, higher reward investments Early investment grants you access to a more diversified portfolio. You have the time to tap into higher risk, higher reward investments. Enrolling in investment opportunities with the potential of a great return can give you a more significant financial cushion when you retire. Investing in your retirement early also increases the probability of your investments weathering market fluctuations successfully.

Don't count on Social Security benefits In the United States, the increased longevity of a fast-growing, aging population paired with decreased population growth means that more and more people will continue to turn to Social Security benefits. Social Security will be paying out more than what is coming into the program, which negatively impacts the long-term viability of Social Security. Many people account for Social Security benefits in their retirement financial planning.

Considering the uncertain future of Social Security, it is vital to account for the possibility that Social Security will not be an available option. People who start saving for retirement earlier in their careers increase their chances of their retirement savings being able to keep pace with inflation.

Morgan Asset Management 6. Longer life expectancies On average, people are living longer than before.

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