🤦♂️ The $461,000 Mistake - And how you can avoid it!
👋 Hi finance enthusiasts and fellow investors!
Today I want to talk about something that is incredibly important for everyone to understand. When it comes to building wealth, the biggest cost you face is the cost of waiting to invest.
I realize all too often in conversations that people don't understand the magnitude of that cost, so I'm going to quantify that for you today.
And of course, I understand that there are always legitimate reasons to wait to invest or to try to time the market, but at the end of the day, it's always about:
Time in the market - not timing the market.
So don't wait on the sidelines forever, just get started!
The information provided in this newsletter is for educational and informational purposes only and should not be considered as financial advice.
Case Study
Now, let's move on to a case study to demonstrate the actual cost of waiting. Allow me to introduce two individuals:
Lisa: She starts investing at the age of 20, putting aside $500 per month for 20 years.
Kevin: He decides to enjoy his 20s and begins investing at age 30, also contributing $500 per month.
Assumptions: 6% per annum, taxes already deducted.
Let’s crunch the numbers and see what we get:
After 20 years, Lisa's investments grow to a value of $233,956, while Kevin's portfolio only amounts to $83,830. This 10-year delay cost Kevin a staggering $150,126 in lost growth!
But it gets wilder!
After 30 years: Lisa's investment reaches $503,000, whereas Kevin's stands at $234,000.
After 40 years: Lisa's investment soars to $984,000, while Kevin's is at $503,000.
After 41 years, Lisa becomes a millionaire at the age of 61 by investing $500 per month. On the other hand, Kevin, who waited 10 years, has only accumulated $539,000. That's a jaw-dropping $461,000 mistake! 🤯
Clearly, those initial 10 years paid off big time for Lisa. Congratulations to her!
PS: If you invest more than $6k per year the effect will be even greater! That’s the reason why I invest so much in my 20’s. This will set me up for life 😎
Reasons
Early Start: Lisa's decision to begin investing at the age of 20 allowed her investments to benefit from the power of compounding over a longer time period.
Compound Interest Magic: By starting early, Lisa unlocked the potential of compound interest, which Einstein famously referred to as the "eighth wonder of the world." Compound interest is the concept where not only the initial investment grows, but also the accumulated interest from previous periods
This results in exponential growth, as each period's interest contributes to the principal, generating even more returns in the subsequent periods.
In summary, Lisa's early start and the magic of compound interest have been instrumental in her advantage, as her investments have grown exponentially over time.
👉 Takeways
Waiting to invest increases the cost in the long run.
Don't wait on the sidelines forever, get started!
Investing anything is better than investing nothing!
and remember:
Time in the market - not timing the market.
🤖 Announcement
At CryptoExplorer we announced the world's first personalized AI advisor for cryptocurrencies last week! If you missed it, here's the link and waitlist: Announcement
Wishing you a fantastic weekend!
Cheers,
Stefan
Co-Founder of CryptoExplorer