One of my favorite investment sayings is this: "The best day to start investing is today." I can't tell you how many times I hear that people are going to wait. They feel that either the market is overpriced, at or near all time highs, or they just think they aren't in a position to start. The problem is if someone doesn't start saving and investing their money now, life only gets harder over time.
Here are a few common excuses, and some tips to get started investing anyways.
I'm just not ready
Waiting for the perfect timing in life is not an option. The perfect time will never come. Life happens, things break, and unforeseen expenses will always pop up. What people need to realize is that paying into a retirement/investment account is as important -- or arguably more important -- as paying a mortgage. It needs to be considered an essential bill when making a budget. Personal Finance 101: Always pay yourself first.
Yes, not eating out as often, not going through a coffee stand everyday, and not going to the bar every weekend in order to invest in one's future self may be a sacrifice now. However, one's future self will be very thankful when they are not able/willing to work anymore. Lets face it, social security just doesn't cut it. If there is nothing to supplement that check, then the hard times to save now will seem great in comparison. So don't make excuses, and put a budget in place and stick to it.
No matter how much or how little money someone makes, many spend exactly what they earn. I'm not gonna lie, it takes discipline and structure in order to save money, but everyone can do it. According to one survey over 56% of Americans have $5,000 or less in their savings account, and 39% of Americans don't have enough saved for a $400 emergency. An emergency fund should be enough to get you by for 3-6 months.
Tip: Try tracking your expenses for a whole month. Keep track of every little thing. You will be surprised how much you might be able to save by making just a few adjustments.
The market is too high.
For those concerned about the market highs, I like to point out that it's always hitting new all-time highs. That's the point of investing: To keep growing. In contrast, the downturns are very short-term in comparison. Five years ago the S&P 500 was very near it's "all-time high." Currently as of this writing, it's at a new all time high that is basically double what it was five years ago, as you can see in this Yahoo Finance chart.
The average return of the S&P 500 over the long-term is about 10% a year. That's factoring in all the down turns, crashes, pullbacks, or market corrections -- including the COVID-19 crash in spring 2020. Notice too that even during the COVID-19 crash, the market was still higher than it was four years prior, and recovered and then some in just a few months. Bear markets are generally short lived compared to bull markets.
The point is that even at all time highs, it is still the right time to start investing. Timing the market perfectly is just not realistic. More often than not, the prices just go up and investment gains are lost.
Tip: If you want to buy the inevitable market dips, just contribute to your account on a monthly or quarterly basis. That way you'll have a steady stream of new cash to take advantage of these downturns when quality companies "go on sale."
The real fear to have.
For so many would-be investors, the ultimate fear is losing their hard-earned money in the stock market. They listen only to the stories of how the market crashed and everyone lost all their life's savings. In reality, an investor only loses if they sell what they own in a down market. It can be hard to stomach such crashes, but every time there has been a crash within a few years or less it has recovered. Ride out the lows, stay the course, and keep contributing to your accounts. The potential gains far outweigh any short-term crashes.
The real fear is not investing at all. Some build up their savings accounts, which is a healthy habit up to a certain point. But after an emergency fund has been established and any short-term goals for purchases are set, any other money should be put to work. Cash and savings accounts pay little to nothing. Otherwise inflation (the steady rise of the cost of living) makes money lose its value. It simply will not go as far towards purchases later on. In order to beat inflation, money saved has to be invested in assets that work for you, things like stocks, real estate, or a side business. Remember, keeping money in a bank account, or under your mattress may be "safe", but it is going down in value because of inflation.
If you have an investment account, great! If you feel like you aren't building it up enough or you don't have one started at all, stop waiting. Take action. Don't procrastinate. Get your money working for you today. It only hurts your future self to wait. If you need a review of your accounts, or help getting started with an account, please contact us. We can get you set up with the right account and savings strategy that works best for your situation.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk and you may lose your principal.