There's something liberating about New Year's resolutions: a fresh start, where the calendar resets, and the past can be forgotten. Financial goals are a hot topic this time of year, and investing is one of the best ways you can build wealth.
Fortunately, 2022 is arguably the best year in history to invest, especially for those just starting their journey. Here are three reasons to jump into investing -- and gain your greatest advantages -- today.
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1. Investing is much more accessible
Investing was like an exclusive club back in the day. It wasn't that investing wasn't doable for the average Joe, but it was tedious and expensive for all but the already wealthy and connected. Before the internet, you had to call your broker to buy or sell stocks, and brokers charged high fees -- as much as a 2.5% commission on each trade.
Investing is much more accessible today, thanks to the internet. Gone are the days of having to phone in trades to a broker; investors can buy and sell at the push of a button through online trading platforms like Robinhood Markets or other brokers on their computer or phone.
Meanwhile, this accessibility to the stock market has created a more competitive environment among brokers. There has been a race to the bottom, so to speak, providing fewer barriers to investing in the markets for customers. Multiple brokers now process trades free of charge, and some even let investors trade fractional shares, making it even easier on investors. We live in an age where virtually anyone can become an investor with ease.
2. More information than ever
Thanks to the internet, there are nearly endless amounts of information available for us to consume today. You can gain both factual and opinionated information about stocks from sources like:
- Financial websites
- Forums and message boards
- Social media
- Investor relations pages on company websites
- Public filings like quarterly and annual company reports
- Newsletters
It's now possible to discover a company you know nothing about, and in a matter of minutes, you can pull up financial statements, investor presentations, and glean the internet for existing analysis and opinions on that company. All this means the individual investor is arguably more empowered with information entering 2022 than at any point in history.
3. The best time to invest was yesterday; today is the next-best thing
The mathematical reality is that the longer you invest, the better you do. This is because of compounding returns, where money generates returns over time, and those returns continue growing, creating even more returns. The longer money works, the more time it has to repeat this cycle.
With that in mind, it's essential to start investing as early as possible. We can't go back to yesterday, so today will always be the best time to start investing. Imagine that you want to build a $1 million nest egg for retirement.
You decide to invest $500 every month into index funds that average an annual return of 10% every year. This scenario would take you 35 years to hit $1 million. In other words, you start this at age 25, and you are a millionaire by the time you're 60.
You can manipulate the math on the example above a bit to make a couple of points:
If you start at 35 years old and want to hit $1 million by age 60, you need to increase your monthly investments to $1,105 per month, more than double! On the other hand, if you got an even earlier start at age 20, you would only need $315 per month to hit your $1 million goals at age 60.
The moral of the story? The sooner you start, the less financial effort it takes to build wealth. Compounding does its best work in its latest years, so give it time to work for you!
Start 2022 with a bang
So make sure to hit the new year running; there are several resources out there. If you're just starting your investing journey, learn how to invest in stocks. Consider taking advantage of tax-advantaged retirement plans like a 401K or individual retirement plan (IRA).
If you act intentionally and make a plan to contribute money to your investments regularly, your actions likely will reward you with wealth that continues compounding year after year.
