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The Best Time to Invest was 10 Years Ago. The Next Best is Now!

Have you ever considered investing in today's top-performing assets? Some might wish they had invested in Bitcoin when it was $100 or Apple Inc. when it was $1. But could you make that decision without knowing how valuable they'd become in the future?


photorealistic plant with coins

An old proverb says, "The best time to plant a tree was 20 years ago. The second best time is now." Like planting a tree, investing is about sowing seeds for the future. Those who started investing years ago are reaping the benefits today. But for those who haven't, the next best time to start is now.


Investing can make some people anxious because nobody wants to buy a stock at its highest price or dropping, fearing it might fall further. But it's impossible to predict a stock's exact peak or bottom. Just like everyone else, we can only time the market somewhat.


Charles Schwab's research tests this principle. They compare investment strategies to see which yields the best results over time. Let's delve into their findings and see how they reinforce the importance of starting to invest now.


A 2021 test by Charles Schwab compared five investment styles listed below:

  1. Perfect timing – investing $2,000 once a year at the lowest point

  2. Invest immediately  $2,000 per year on the first trading day

  3. Dollar Cost Averaging – dividing $2,000 into 12 pieces and investing at the beginning of every month

  4. Bad timing – the opposite of number one, investing $2,000 in the highest point

  5. Stay in cash – no investments


A chart representing the 2021 test by Charles Schwab comparing five investment styles

Source: Schwab Center for Financial Research. Invested $2,000 annually in a hypothetical portfolio that tracks the S&P 500® Index from 2001-2020.


According to the study, if you have perfect timing, you will surely come out ahead, but not by much. Numbers two and three were within 11% of the perfect market timer. Even the one with bad timing came out with three times the amount after twenty years compared to number five, who just held their money in cash.


What can we take away from this study?


  • Invest early: Start investing as soon as possible, giving your money more time to grow. This growth happens through compounding, dividends, and capital appreciation. It lays a strong foundation for building wealth, which you can use for long-term goals such as retirement.

  • Invest regularly: By consistently investing over time, you'll sometimes catch market corrections or crashes, which can benefit your portfolio when the market recovers. It also helps reduce risks associated with market fluctuations.

 

  • Diversify your portfolio: A diverse portfolio spreads your risk across various assets, industries, and regions, lessening the impact if one investment does poorly. It can also boost long-term returns by exploiting growth opportunities in different sectors and markets.

 

  • Wait for the tree to grow: Proper investment is a long-term game. Let the power of compounding interest do the work for you. Compounding interest means your money earns interest, and then your money plus the interest earns even more interest over time, helping your savings grow faster.


Examining these strategies gives us insight into the significance of taking action today. Whether you invest a lump sum, dollar-cost average, or leave money in cash, the key takeaway remains clear: starting to invest as early as possible is crucial.


Ready to take the next step towards building your financial future? Contact Astra today to discover how you can start investing now. Let's make your money work for you!

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