“Now is absolutely the best time to invest,” says Stephanie Genkin, a financial planner and adjunct at NYU’s Schools of Professional Studies. “Don’t worry about where the market is and what stocks are doing.”
Genkin’s point is that it doesn’t matter what is going on with the economy, or with the market. NOW is always the time to invest. “There’s no point in listening to what the experts on television say about whether you should get in now or wait to see where the market is heading,” she says.
Instead of worrying about timing the market, the key is to plan for the future. Here are 5 reasons that now is the time to invest — no matter when “now” happens to be:
- Time is on your side
The best time to start investing is now, because you’ll have time on your side. This is especially true of those in their 20s, and even their early 30s. “The longer your investments have to grow, the larger the possibilities for growth,” says Genkin.
The longer your money is invested, the better. Over time, the market nearly always does better. Indeed, if you look at timeframes in decades, you are more likely to see net gains. When looked at over a period of 25 years, the stock market has yet to lose. The longer you are invested in assets likely to grow, the better off you’ll be.
- Compound interest
One of the great things about investing is that your money earns money. This is known as compound interest. “The growth on the value of your stocks and bonds produces more growth,” says Genkin. “Even if you don’t continue adding money to the investment, the value of your portfolio will continue to increase.”
Of course, you get the benefit of time and compound interest if you consistently invest over time. And, due to time and compound interest, the earlier you start investing, the better off you will be. “Even modest returns can generate real wealth over time,” Genkin points out.
- You don’t have to pick stocks
Many would-be investors worry about getting started because they feel like they don’t have the knowledge or expertise to choose the “right” stocks or other investments. The good news is that you don’t have to be a great stock picker in order to build wealth over time.
Genkin recommends that you invest in a low-cost all-market fund. That way, rather than trying to figure out which stocks will perform the best, you can take advantage of the performance of the entire market. Individual stocks might go up and down in price, but, as a whole, the market has historically moved higher over time. There are even bond funds and other funds that allow you exposure to different asset classes without too much difficulty. A number of products today allow you to diversify quickly and easily, and invest for the future without a lot of specialized knowledge.
- Almost anyone can open an investment account
Not only are there low-cost products that can help you gain exposure to large segments of the market, but it’s also very easy and inexpensive to open an investment account. First of all, if you work for a company that offers a retirement plan, like a 401(k), you can easily invest by having a portion of your paycheck diverted to a fund in your retirement account. “Your 401(k) is a great example of how it’s always the best time to invest,” says Genkin. “You don’t try to time the market every month. You set it and forget it.”
There are a number of online brokerages that allow you to open accounts with no minimum balance. You can start investing with as little as $25 if you want. Additionally, robo advisors can help you put together a portfolio meant to help you build wealth for the long-term, as long as you are willing to invest $100 per month.
Over time, you want to increase your monthly investment, since investing $100 or $200 a month probably won’t do the trick. However, as you progress in life, and as your financial situation improves, you can increase the amount you set aside. But any little bit helps, and starting now puts you that much further ahead.
- Take advantage of tax benefits
You can also boost your returns with the help of tax benefits that come from investing. Tax deferred accounts, like Traditional IRAs and 401(k)s allow your money to grow more tax efficiently over time, plus it lowers your tax liability today.
If you want to plan for the future, and you want to avoid paying taxes on your income after you retire, investments like Roth IRAs and Roth 401(k)s can help you. You will have to pay taxes on your money now, but when you withdraw from the account, you won’t have to pay taxes. This can be an advantage if taxes go up in the future, or if you retire in a higher tax bracket.
Investing now can help you build wealth down the road, and the longer you invest, and the more compound interest works for you, the better off you’ll be. With the right approach, and a long-term view of your finances, now is a good time to invest.