A Chinese proverb asserts that the best time to plant a tree was 20 years ago; the second best time is now.
The same is true of investing. In late July 2015, the S&P 500 stood a bit above 2,000. Twenty years earlier (tree-planting time), it was a little shy of 600. Not a bad return.
Over the decades, the march of the market – despite fluctuations both small and significant, blips and recessions – is decidedly upward.
Assuming you don’t have access to a DeLorean equipped with a flux capacitor, we at The Motley Fool strongly encourage you to start investing at the earliest possible age. As soon as you have a bit of money that you can afford to invest (i.e., you won’t go hungry if you lose it all), get investing!
Timing your investment
First-time investors often worry about the timing of their initial stock purchases. Getting started at the wrong point in the market’s ups and downs could leave you staring at a big loss right out of the gate.
Fear not. Over the long haul, the compounding returns of a well-chosen investment will add up nicely, whatever the market happens to be doing when you buy your first shares.
Rather than fretting about when you should make that first stock purchase, think instead about how long you’re planning to keep money in the market. The longer you have to amass your cash, the greater risk you can accept, since you’ll have more time to wait out periods of bad returns.
If you need the money within the next five years, you’ll want to avoid individual stocks and stock-centric mutual funds. If you’re thinking long-term, stocks are a very attractive option. The higher returns are simply too good to pass up.
One word of caution: There’s every possibility you will lose money on your first investment, either because the market hits a rough patch, something unforeseen and unappealing happens to the company you purchased, or a thousand other possible reasons.
Think of your first investment as a learning opportunity rather than a way to get rich. You’ll learn tons just from getting in the game and monitoring your stock. And the sooner you begin learning, the sooner you’ll compile a portfolio of winning stocks, that will put you on your path to investing success … no DeLorean required.
With the when out of the way, let’s move on to how to get started investing.