Start early
Do you think investing is mainly something for older people? Do you think you are too young or do you have too little money for investing? Or do you plan to but keep putting it off? There are many reasons not to start investing when you are young, but there are even better reasons to do so! We give you 5 reasons why you should start investing today.
Return on Return
Return on return, or compound interest, is the almost mythical phenomenon in the world of investing. The more time your money has to grow, the greater the wealth becomes. Your money grows faster when you reinvest your profit every year, because you receive interest on the invested amount plus the interest. We will explain this with an example:
Suppose you invest €100 at the beginning of the year and make a 6% return on it. At the end of the year you will have €106, with a nice profit of €6. If you leave the profit and get another 6% return next year, you will not have a profit of €6, but of €6.36. In the second year of investing, you will not start with €100, but with €106. It seems like a small amount, that €6.36. But if you keep this up in the long term, your wealth will grow considerably. In fact, if two people invest the same amount in total, with person X investing €200 per month for 10 years and person Y investing €100 per month for 20 years, person Y will have a much higher final amount. This is caused by the return on return. Based on the average net return of 4.6%, this results in a difference of more than €9000.
All the time for market movements
Investors know that there is a chance that the stock markets will perform less well for a while. Your money can then become less valuable by investing. That is not nice, but the longer your horizon, the greater your chance of a positive return. If you start investing at a young age so that you have an extra pot for your pension, for example, it is not a disaster if an interim dip makes your investments less valuable. You still have many years to more than make up for any loss.
If you have decided to put money aside for a date far in the future, you can even play this smart. For example, you can invest according to the ‘life cycle’, a strategy that pensions also apply. It works like this: you can take more risk if you still have 40 years to go until your retirement. In the beginning, you mainly buy shares and a little less bonds, because more risk often equals a higher return. The closer you get to your retirement date, or another investment goal that you have set, the more you will reduce the risk. This gives you more certainty that your assets will retain their value at the end.
Save money by budgeting
Have you not started investing yet because you have no money left? A good way to put some extra money aside is budgeting. This allows you to visualize your income and expenses and always keep an overview. By putting some money aside at a young age, you will also be completely used to it later. That is a useful life skill. You probably do not have to take into account the mortgage or childcare costs when you are 25. Teach yourself now to invest a small amount structurally so that it will continue to go smoothly for the rest of your life.
You don’t need any start-up capital
Investing has become increasingly accessible in recent years. Where you used to have to save for years before you had enough starting capital to start investing, this is different now. Nowadays you can easily invest online yourself or have your money invested. With most brokers, a large deposit is no longer necessary. Of course, you can invest some of your savings. Higher returns than on a savings account can now be achieved quickly. Please note that this is also money that you can miss, because you can lose part of the deposit.
No retirement fear
Another thing you don’t think about when you’re young: your pension. At some point, something will start to gnaw at you and you’ll think “Shouldn’t I do something about my pension?” This feeling comes faster than you expect. Many Dutch people have no or too little pension that they are building up. This is because more than a million Dutch people work as self-employed persons and more and more people in employment do not build up a pension through their employer. People who do not build up a standard old-age provision have to arrange an extra pot for later themselves. By starting to invest early and investing small amounts at a time, you don’t have to worry about this. You now know that you are doing well and that you will reap the benefits later.
Do you also want to start investing?
Read up on the various possibilities and risks. Also choose a broker that suits you best by comparing brokers .