Primetime Investing: Why It Pays To Start Early To Invest

Reasons To Shockproof Your Life With Early Investments

To invest is to plough resources into a project or venture with the expectation of earnings and profit. This does not have to be big time. Again, resources are not strictly money. However, in our present context, the subject is financial investment. Financial investment refers to that action taken where financial resources that could be expended today, even on important existential needs, are shielded from consumption and applied to a purpose that offers a chance of better value in the future. In effect, there must be (1) some resource to invest (2) a decision to deny current satiation by the use of that resource and to to for future value (3) an investment outlet to absorb the resource and (4) an expectation of better value. Now, this sounds like brain-racking and serious self-motification stuff which one shouldn't be in a hurry to dabble into. A critical question to ask then: when is the right time for a person to begin to bother about the matter of investing? Does it have to wait till adulthood or put differently, is the timing of getting in important?

On the strength of the first condition given above - availability of investment resources - most young people will readily rule themselves out. And these will not just be students and unemployed youths. Trust that many that have jobs will reason that it is early and besides, the income is insufficient to meet running costs, let alone setting some aside for investment. Invariably, the tendency is to wait for earnings to get bigger and to believe, in any case, that there is enough time. This article aims to draw your attention to the fallacy of that reasoning and to admonish you, if you permit, to make hay even before the sun shines.

Now, Not Later
The wisdom is not to defer taking action to build your financial capacity and strive for financial independence. There is never a better time to start than now, irrespective of your status or station in life. You may not accept it, but part of the problem is that many have not bothered to include investing in the agenda, for diverse reasons. Some common reasons will be the mindset of lack and insufficiency (not earning enough), a self-exclusion syndrome (it's for rich people), pre-occupation with frivolities (burn resources on 'urgent' needs that won't endure), etc. If investing does feature as part of your priorities, how can you get going, knowing that investing will require considerable effort? You can't expect to build strong financial conditioning without effort, you know. To succeed, you need to get off your comfort zone and be ready to inconvenience yourself a bit. If you get that, it won't matter whether you are a student, a junior employee, a low income earner or whatever. You will always strive to squeeze something out and plough into your future.

Attitude, Not Quantum of Inflow
We drive ourselves into poverty more by cultivating the wrong ideas and attitude than by our circumstances. That is why the man that earns N10,000 monthly will argue convincingly (at least to himself) that this sum is too low to sustain current livelihood, let alone accommodate any investment. He possibly builds up some debt burden, if only to prove the point. Note however that if our friend loses his job and is fortunate to replace immediately with one that pays only N8,000 monthly, he hangs on to life and survives anyway. If he had done the earlier job for 4 years and had stuck to spending N8000 per month, be would have built reserves of over N96,000, plus interest. If he invested in something more profitable, it would be much more. The message: it's not how much you earn or receive that matters most, it is the mindset and mental conditioning you have. Which is why even students can accumulate significant investments, if tutored. The reason is that investments to be made with N1,000 abound and even students squander multiples of that sum.

Regularity, Not Lumpsum
There is the temptation to think that it's only those who lay hands on a lumpsum that can invest. Anybody who takes this position may continue to wait for that lumpsum and it never comes. That could leave one where he wouldn't love to be. The wisdom lies in the alternative route which encourages regular, even if small investments on an on-going basis. One, that puts you in the right frame of mind and guarantees that if and when you chance on a lumpsum , you know the treatment to give it. You can bet that the other fellow will not. Two, is assures that you have something going on, and perchance there is no lumpsum, your tracks are still covered. Thirdly, getting the habit going is the hard part and once that is achieved, the mental strength to stretch yourself further (increasing the quantum or even frequency) will naturally come, especially when the results become evident. Besides, it makes it a lot easier. If you have started early, you will be surprised where this will get you a decade down the line. What is likely to result is that before you get to middle age, there is a comfortable nest egg in the kitty.

Investment Multiplied By Time Builds Wealth
Investment needs time to grow and the more time you allow it, the more bountiful your likely harvest. That easily places the person that starts early at a great advantage. The person who commences earlier will, all things being equal, accumulate more investment value over time. The compounding impact is known to produce amazing results over a the long term. Besides, for a given target future investment value, starting earlier reduces the burden, as there is a more gentle investment gradient to content with. Consider two people A and B who individually target to accumulate an investment value of N10 million in 20 years' time through even annual investment. Assume further that A commences immediately, investing N500,000 every year for 20 years. B, on the other hand, waits for ten more years to commence investing in the eleventh year, investing a million annually. If we discount the impact of interest earnings which even favours the early-starter, their investment gradients would appear as follows:
Investment chart

Obviously, to achieve similar result as A over the shorter period, B has to sweat it out, climbing a steeper ladder. If he doesn't have the capacity, he would fail to catch up.

Early Permits More Risk And Aggression
Investing involves risk-taking and risk is directly related to returns on investment. Taking more risk will not necessarily gurantee higher returns, but well-calculated risks may provide a big break. They however raise the potential for loss, if you misjudge the market. Beginning early provides the boldness to take more risks and shoot for higher returns. The reason is simple: if mistakes are made, there is ample opportunity to correct and rebuild. When time is running out on you, the tendency is to settle for low-yield, higher safety-margin investments since you can't afford to lose. Early beginners can stretch their luck, with a chance of substantial returns and accelerated growth, because they can afford to lose and still bounce back.

Taking Your Future Into Your Hands
What should be clear now is that to build a stable financial future, one must take investment seriously as that is the bedrock of financial capacity and security. Disciple is at the heart of any success that can be achieved in this process, but knowledge is the key. You need to understand the impact of little droplets that can accumulate to an ocean or at least a bowl of water, if allowed sufficient time. You must also know that no time is better to commence than now, especially if you are young. That may sound contradictory, but the idea is that you shouldn't let time slip as has happened to people before you. Don't commit the error of waiting for the big bang, a major financial break that suddenly changes all things. It may never come and, if it does, let it be a major boost to a system that is already structured to work.

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