Start Investing Early

Start investing early if you hope to be rich through stock trading. In fact, a good age bracket to start trading is 16 to 20 years. It bears repeating: asking you to begin early to invest - whether in stocks or other financial assets - is about the most precious piece of advice you will be getting from me or anybody else regarding your financial success. Heeding that advice will also prove one of the most important steps you will ever take to position your life for financial stability and, plainly, wealth. It will therefore only be apposite to ask for your undivided attention. The point being made in this piece is that the much-vaunted benefit of investing can be explosively amplified through accelerated timing. Simply put, by commencing your investment action early in life, you position yourself to enjoy a huge multiplier benefit. The reason is simple: time has the uncanny ability to generously grow your investment. This is so because time allows the 'magical' impact of compounding to power up your investment.

Let's not waste words on this subject and go straight for figures that can bring a graphic demo of what is being said. We will look at a hypothetical case which is, however, reflective of common real-life occurrences.
  • Start Small Early, Beat Big Late-starter


    Think of two guys Jide and Stanley, who left the university the same year, and luckily both got jobs immediately after their NYSC service. Stanley was however more fortunate to land an oil company job (parental connection did the magic!). Jide's was with a stockbroker, where he got paid a tenth of what Stanley was earning. For Jide, however, he quickly learnt lessons in investing, and not having a wealthy background, got determined early to transform his life, even with his relatively poor earning. In contrast, his school-mate, Stanley, who earned a lot of money, didn't quite understand investment. How did they spend their earnings. Jide committed to saving N2,000 of his monthly salary (actually 5%) and investing N24,000 annually. Stanley had a lot of fun and owned all sorts of cutting-edge gadgets and devices: hot cars, high-tech home electronics, mobile devices and all.


    It took 20 years before Stanley got a wake-up call, after a well-respected superior invited him and really dressed him down about his scandalous spending profile. The message sank. He was so touched that he immediately invested N500,000. He kept on at N400,000 annually (from monthly savings of N33,000) for the nest 10 years. Meanwhile, Jide had raised his annual investment to N36,000 following a raise, in the sixth year and again to N60,000 in the twelfth year. He got a higher-paying job in the twentieth year and boosted his annual investment to N120,000. Now, let's see a chart of these guys' investments and how they ended up at 30 years of employment, assuming returns rate of 15% over the entire period:





    Jide's Investment Profile
    Stanley's Investment Profile
    Yr
    Annual

    Accretion
    Total

    Capital N
    Annual

    Interest N
    Year's

    Closing N
    Annual

    Accretion
    Total

    Capital N
    Annual


    Interest N
    Year's

    Closing N
    1
    24,000
    20,000
    3,000
    23,000
    0
    0
    0
    0
    2
    24,000
    47,000
    7,050
    54,050
    0
    0
    0
    0
    3
    24,000
    78,050
    11,708
    89,758
    0
    0
    0
    0
    4
    24,000
    113,758
    17,064
    130,821
    0
    0
    0
    0
    5
    24,000
    154,821
    23,223
    178,044
    0
    0
    0
    0
    6
    36,000
    214,044
    32,107
    246,151
    0
    0
    0
    0
    7
    36,000
    282,151
    42,323
    324,474
    0
    0
    0
    0
    8
    36,000
    360,474
    54,071
    414,545
    0
    0
    0
    0
    9
    36,000
    450,545
    67,582
    518,126
    0
    0
    0
    0
    10
    36,000
    554,126
    83,119
    637,245
    0
    0
    0
    0
    11
    36,000
    673,245
    100,987
    774,232
    0
    0
    0
    0
    12
    60,000
    834,232
    125,135
    959,367
    0
    0
    0
    0
    13
    60,000
    1,019,367
    152,905
    1,172,272
    0
    0
    0
    0
    14
    60,000
    1,232,272
    184,841
    1,417,113
    0
    0
    0
    0
    15
    60,000
    1,477,113
    221,567
    1,698,680
    0
    0
    0
    0
    16
    60,000
    1,758,680
    263,802
    2,022,481
    0
    0
    0
    0
    17
    60,000
    2,082,481
    312,372
    2,394,854
    0
    0
    0
    0
    18
    60,000
    2,454,854
    368,228
    2,823,082
    0
    0
    0
    0
    19
    60,000
    2,883,082
    432,462
    3,315,544
    0
    0
    0
    0
    20
    120,000
    3,435,544
    515,332
    3,950,876
    500,000
    500,000
    75,000
    575,000
    21
    120,000
    4,070,876
    610,631
    4,681,507
    400,000
    975,000
    146,250
    1,121,250
    22
    120,000
    4,801,507
    720,226
    5,521,733
    400,000
    1,521,250
    228,188
    1,749,438
    23
    120,000
    5,641,733
    846,260
    6,487,993
    400,000
    2,149,438
    322,416
    2,471,853
    24
    120,000
    6,607,993
    991,199
    7,599,192
    400,000
    2,871,853
    430,778
    3,302,631
    25
    120,000
    7,719,192
    1,157,879
    8,877,071
    400,000
    3,702,631
    555,395
    4,258,026
    26
    120,000
    8,997,071
    1,349,561
    10,346,631
    400,000
    4,658,026
    698,704
    5,356,730
    27
    120,000
    10,466,631
    1,569,995
    12,036,626
    400,000
    5,756,730
    863,509
    6,620,239
    28
    120,000
    12,156,626
    1,823,494
    13,980,120
    400,000
    7,020,239
    1,053,036
    8,073,275
    29
    120,000
    14,100,120
    2,115,018
    16,215,138
    400,000
    8,473,275
    1,270,991
    9,744,266
    30
    120,000
    16,335,138
    2,450,271
    18,785,409
    400,000
    10,144,266
    1,521,640
    11,665,906

    2,136,000
    18,785,409
    4,500,000
    11,665,906






  • Check the Figures, See the Picture


    First, note the point that Stanley was just a late-starter, but in absolute terms invested much more than Jide - in fact 2.1 times (210%) of Jide's (N2,136,000 : N4,500,000). However, Jide ended up with a lot more money (N18.79 million : N11.67 million) for his investment of less that 50% of what Stanley eventually invested. You see the effect of early investment? Again Jide worked under less pressure, spreading his saving (and investment) over time, at bearable figures: first N2,000/month, then N3,000/month, later N5,000/month and finally N10,000/month. These figures are realistic even for a low-paid worker, indicating that nobody should really be poor. Most well-paid jobs place you in a position to invest multiples of what Jide did, meaning you should end with multiples of N18.79m over a 30-year work span. Stanley was lucky that he eventually got jolted into action, but what if he wasn't? Or no longer had a job that empowered him to load up at an accelerated pace of investment? Suppose Jide stretched himself a bit more and plugged in higher figures initially? You can do the math and see what a huge impact it would have left. If he invested in stocks over that entire period, we possibly won't be working with 15% returns. Our stock market has averagely turned out much higher rates of returns for many years running.
Act Today, Delay is Dangerous


This is graphic enough, don't wait to act. If I knew this much when I started out in employment, it would have been a different story. Do you want to get this message a bit late, like Stanley, like me? Or never, like some unfortunate guys? No matter your level of earnings, you could (and should) take control of your finances and apply simple, actionable principles and investment vehicles to create the wealth you need. Jide's N19m isn't too much money, granted. But many finish a 30-year work life without such investment value in their pocket. Jide, too, could have done better, though it's gratifying that he had the foresight to achieve the much he did. Don't let the lesson here slip through your hands. No better advice!

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