When should you start investing?

When should you start investing?
The best time to plant a tree was 20 years ago. The second best time is now.
Chinese Proverb

I love this quote. It’s applicable to just about everything in life, but it most definitely answers the question of when should you start investing.

Before we get deeper, I’d like to clarify: investing is not trading. When you think of stock traders on the floor of the NYSE waving papers and yelling, or someone sitting in front a wall of monitors feverishly monitoring the markets so that they can time to the minute when to buy and sell, that is not what I’m referring to.

When I say investing, I mean buying stocks or funds to hold for the long(ish) term. Usually investing for a long term goal like a wedding, home ownership, or as in my case retirement.

So when should you start investing?

Now is the answer.
Invest whatever you can, whether it’s $25 per pay period or $2000/month is of no matter. The sooner you start, the better off you’ll be. This is because of compound interest: the magical phenomenon of where interest is paid not only on the contributions you make, but on any previous interest you earned as well.

For example:

Month 1 you invest $100 and earn 10% which gives you $110.

Next month you invest another $100, bringing your balance up to $210. It is this $210 that the 10% growth is then calculated on, giving you $231. And on and on it goes.

It becomes even more magical when you invest in a tax advantaged account like a Roth IRA, TFSA, or RRSP. There are different services out there such as Wealthsimple and RBC InvestEase for tax advantaged and general brokerage accounts. Both can be linked directly with your banking allowing for easy transfers and automatic withdrawals. And there are many other service providers such as Vanguard that I encourage you to look in to.

So again, start today. If you’re managing debt you’ll want to see if it makes sense to wait or go ahead, but know that you don’t have to wait to be debt free to start investing. Start today, get ready to watch the magic of compound interest work for you.

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