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Why you should invest

Author: Elina Roy
by Elina Roy
Posted: Jun 15, 2020

Investing allows you to significantly grow your money over time thanks to the power of compound returns.

Compounding can be called the Eight Wonder of the World. Thanks to the power of compounding, a single penny could grow into millions of dollars, given enough time. You may not live that long, but consider the following examples.

Say you start investing when you’re 16…As unrealistic as it may sound to start investing that young, say you got a small inheritance and you decided to invest it—if you put $5,000 in an account with an interest rate of 7 percent and contribute an extra $200 a month, after 30 years you’ll have a little over $284,000.

See how much your investments could earnInvestment growth calculator. See how much your invested money can grow:Initial investment*$5,000.00Enter how much you'll invest each month*$200.00Annual growth rate*7.00%Average ROI% (rate of return) based on your investment risk portfolioNumber of Years30Final ValueInterest earnedUsing a more realistic example, say you start investing when you’re 22, right after graduation…You start out just putting $50 a month into your 401k, with a 50 percent company match.

If you raise contributions by the same amount as any pay raises, you’ll have more than $1 million by age 65. That assumes annual raises of 3.5 percent and an 8.5 percent return on 401(k) investments.

While there are many factors to consider – a simple example like this demonstrates the power of compound interest if everything goes right.

So if you want to start saving now, you could even have a whole year’s salary saved by the time you’re 30…Take a look at the chart below to see how.

How To Save A Year’s Worth Of Salary In Your 401(k) By Age 30Age Salary Your 6% Contribution 3% Employer Match Total Contributions Year-End 401(k) Balance22 $30,000 $1,800 $900 $2,700 $2,889.0023 $30,900 $1,854 $927 $2,781 $6,123.6024 $31,827 $1,910 $955 $2,864 $9,707.0725 $32,781 $1,967 $983 $2,950 $13,670.0326 $33,765 $2,026 $1,013 $3,039 $18,045.6227 $34,778 $2,087 $1,043 $3,130 $22,869.7128 $35,822 $2,149 $1,075 $3,224 $28,181.1429 $36,896 $2,214 $1,107 $3,321 $34,021.9530 $38,003 $2,280 $1,140 $3,420 $40,437.60When should you invest? that you know why you should invest, how about when to invest?

The answer to that is pretty simple. The right time is now.

Investing sounds more intimidating than it is. Yes, there’s always a potential risk for loss, but there’s an even bigger potential for serious gain.Doing anything for the first time can be terrifying, especially when it involves your hard-earned cash. But here’s some advice for first-time investors.

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Bikey Sah I used to write an article on tech

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Author: Elina Roy

Elina Roy

Member since: Jul 20, 2018
Published articles: 1

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