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Importance of Investing Early

Importance of Investing Early

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Some might not consider the significance of investing money, but practically speaking, it helps us achieve our goals in any financial aspects. Since it’s widely known that money serves as a medium of exchange, it is very important to do investing for future purposes. Investing money can help us settle our financial worries such as utility expenses, educational expenses, or any other daily expenses.

Many people save their money in a mere way of putting pennies into their piggy banks but it never occurred to their minds about doing an investment which does the saving easier and it even also allows them to receive extra earnings.

 

What is investing?

Investing describes the process of giving something to someone to get something in return. It is to invest a material to produce a gain or benefit.

Investments can be anything that the investor thinks can generate income or more benefits such as properties, stocks, assets, money, materials, and even time or feelings and emotions.

For example, a student invests his time by doing well in his studies to graduate from college and get a stable career afterward. Another example is when an individual uses his or her skills to receive his or her awards in a certain job.

In line with business, investing is allocating capital or any useful product for commercial purposes. A common way to invest money is to put money into the stock market where they buy a stock and then own a portion of the company they purchased from. When the business profits, they pay a portion of the dividend profits to the investors based on how many stock shares they bought.

Ultimately, investing is just a process of making the money they expended to grow and receive extra benefits.

 

What are the risks of investing?

There will be a lot of risks when you invest and it is better to be aware of these possible risks that you can be exposed to. With this purpose in mind, investors would know how to act when they experience the risks.

 

Why is investing early important?

What people don’t realize is that investing as soon as possible is a much better way, and if they had a chance to take advantage of the opportunities they’ve missed in the past, they’d have fewer financial issues at the moment.

But then again, why?

Firstly, time will always allow you to prepare for the possible risks when investing. It allows you to recover if something goes wrong during the investment such as the aforementioned risks.

Secondly, investing in early is practical. When you continuously reinvest your earnings from the interest earned on interest, you are rising the investment return dramatically. Investing early enables you to take advantage of the potential gains from compound interest.

Here is a scenario that elaborates this claim:

Peter invests 10,000php in company x that earns 10% per annum for. Then his friend, Alfred, follows after 5 years and starts investing 15,000php a year under the same privilege.

The table below shows what will happen to their money in 10 years:

 

YearPeterAlfred
Amount invested (in pesos)Value of investment (in pesos)Amount invested (in pesos)Value of investment (in pesos)
110,000.0011,000.000.000.00
210,000.0023,100.000.000.00
310,000.0036,100.000.000.00
410,000.0051,051.000.000.00
510,000.0067,156.100.000.00
610,000.0084,871.7115,000.0016,500.00
710,000.00104,358.8815,000.0034,650.00
810,000.00125,794.7715,000.0054,615.00
910,000.00149,974.2315,000.0076,576.50
1010,000.00175,311.6715,000.00100,734.00

 

After 10 years, Peter earns 74,577.67php more than Alfred even when Alfred invests more than Peter. This concludes that the earlier you invest, the more money you gain.

 

Lastly, the earlier you invest, you will be prepared for the possible financial difficulties in the future and you will no longer have any troubles in facing the challenges in regards to money and business.

 

Investing money makes your financial status stable. Despite the possible risks, you still have a lot of time to prepare when you invest early. So invest as soon as possible because not only it prepares you for possible issues, it also makes your money grow and who knows what the money can do to your future.

 

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