Too many people, particularly young ones wait too long to start investing. Their excuse? “I don’t have enough money.” The truth is, even if you only have N5,000 to spare, becoming an investor today is the best move you can make because it puts the power of interest compounding in your favor. The earlier you start investing, the more time your money has to compound and grow.
Investing is something that a lot of young people in their 20’s are scared of and there is absolutely no reason to be! Investing is great! It will help you earn a better return on your money, achieve your financial goals, and increase your net worth. So, how much money should you start with? Honestly, you don’t need so much to start investing, N5,000 will do the trick.
Let’s say you are 25 and you want to retire when you are 65. If you invest your N5,000 today and earn an annual rate of return of 5%, after 40 years your N5,000 will have turned into N2,520,000. On the other hand, if you invest your N5,000 when you turn 30, by the time you are 65 you will only have N2,220,000.
After you have set aside the amount you want to initially invest you should continue putting money away each month solely for investing purposes. Some investments have a minimum amount you need to have before you can purchase. Making your contributions automatic isn’t a bad idea either! Once you have saved up enough to buy your first investment you must decide what exactly you will buy. A good thing to do is to identify what your investor profile is and what sort of risk tolerance you have. This will allow you to make an educated decision as to what you should buy. If the money you have invested is going to later be used for a down payment on a house or land, you may not want to pick something super risky. Likewise, if you don’t plan on pulling this money out until retirement you can probably deal with more risk.
After you have bought your first few investments and are starting to get the hang of things you should focus on diversifying your portfolio. Look at different holdings within an Exchange Traded Fund (ETF), mutual fund or stock in different industries. Diversifying will help weather the risk in your investment portfolio.
Continue to contribute to your investments no matter what your financial circumstance. Sometimes you will only be able to come up with N5,000 a month, but that’s okay as there will be months that you can contribute a lot more. By making investing a habit you won’t even notice that you are growing your nest egg.
Lastly, you should start to invest as early as you possibly can. By starting early you will not only weather your risk, but allow for long-term company growth and be able to reap the benefits of compound interest. It’s never to early to start investing, so stop procrastinating to your future-self and invest in your future today!
So what are you waiting for?