START INVESTING | Introduction

Too Big to Ignore: The Benefit of Time (Or Why You Should Start Investing Now)

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I do remember it well even today. The year 2001 – the year I joined the Oil & Gas industry as a field engineer.

Why do I remember it well?

One reason is that it was an exciting change in my life. After some years of studying (and enjoying student life) I started my first professional career. From standing up late to early riser (not fun). From learning things “by the book” to fixing problems in practice.

Great stuff. But there is another reason for remembering it.

It was the year I started to have a real income! And compared to what I had lived on earlier, it looked big!

So what did I do?

I blew it on stuff I could not afford earlier. DVDs. Gadgets. Clothes. You name it. And it felt great.

But after a few more months… I stopped that. The job kept me busy and far from home, and the fun of buying stuff was wearing off. And the bank account continued to grow.

So what to do with the money?

I did not know and I had little time to think about it.

That is, until inspiration hit me! 2001 happened to be the year of the first iPod release!

Listening to music through a portable player was not my thing… but I knew what gadgets were on the market (remember my initial shopping spree!). And when I saw this product, I thought to myself:

“This will become a bestseller. I should buy some Apple stocks, NOW!”.

As we all know by now, I was right about my hunch. The iPod became a bestseller product and Apple stocks went through the roof.

AND I DID NOT BUY ANY STOCKS!!

So what had happened?

The Price of Laziness

What happened was… I was lazy.

Occupied with other “more important” things. Like my job. Writing e-mails. Fixing tools. Working in the desert for my clients. The usual excuses. Bullsh$%.

What would have happened if I had bought Apple stocks for, let’s say, 1000 dollars, and kept them until today? After all, I had spent much more on gadgets already…

Answer: these stocks would be worth $100,000 today! One hundred thousand! Or a 100-fold increase! Talk about the price of being lazy!

That is mind boggling. But it does not end there.

What do you think would have happened if instead of making a one-time investment I would have purchased these stocks regularly, on a monthly basis? Let’s say for $ 500 per month, every month.

Take a look!

Apple stocks cum value

Woah. More than 2 million by investing 500 USD per month? That’s amazing. And, if you are skeptical about this… you are right. Not because it is not true, but because Apple stocks did exceptionally well.

I used this example on purpose to show what is possible and what happens if you do not start to invest as early as possible, even if it is just by using a small amount of your salary.

Still not convinced? Here is another example…

Let’s compare two scenarios:

Investor A (the “early investor”) starts investing with 500 USD per month. Once a year, he increases this amount by 100 USD, as his salary is also increasing. E.g. in 2002, he invested 500/month, in 2003 600/month and so on.

Investor B (the “late investor”) starts 8 years later, but he invests the same amount as Investor A per month during each year of his investments. So when he starts to invest in 2010, he invests 1300/month.

Check out how their portfolios increase over time (with same growth rate of 5%):

Early versus late investing curves

The early investor has a head start of nearly 100,000 USD compared to the late investor.

And it’s perfectly explainable. After all, he did put money aside for 8 years already.

But here is the scary part: the portfolio gap is increasing over time, although both investors invest the same amounts over the same year, and they have the same returns!

It’s the magic effect of compound interest. Depending on time and amounts invested, its effect can be dramatic.

So when do you think did I start to invest? Way too late. After my initial “hunch”, it took me more than 10 years before looking into investing into stocks again. But I am happy that I did, even if it was late.

What to invest in?

Another thing that changed once I had a salary was that I felt suddenly wanted. Wanted by… people who tried to sell me their financial products and services.

It’s not only about timing but about what to invest in.

I will discuss more about such products and the people selling them in a later post. Sufficient to say for now is that there are many ways to invest your money.

Apart from trading with stocks, you could also:

Invest in Real Estate
Sign up for managed savings plans or equivalent products
Trade with other types of stocks, like penny stocks
Invest in Mutual Funds, ETFs and related products
Trade with derivatives, like options
Savings accounts, bonds, etc.
Gold, oil, precious metals, commodities etc.
A mix of some or all of the above

In the next few posts I will discuss several of the above mentioned investment types more in detail.

OK I get it. But how much?

Quick question… how much is a good amount to put aside regularly?

It’s up to you, as long as you consider these 2 things:

Do so regularly. Try your best to make it a monthly thing!
Make it sustainable. Don’t stop drinking your cappuccino (or beer) 🙂

Remember… investing will help you to retire earlier or buy something later that you otherwise could never afford. But that doesn’t mean to stop having fun until then.

But for now…

I just want you to take away this:

First, if you did not start investing yet, start NOW.

It will make a big difference in the long run. If you do not know in what to invest yet, no problem! Start with putting money aside for the time that you know what to do. Any savings account will do.

Second, learn more about investing.

Read the subsequent posts to get some additional ideas. If you think stock trading is for you then you can start with my Stock Trading 101 course (it’s free!).

For other investment types, there are a lot of excellent resources available – take the time to study them before putting down money.