Are you interest in investing, but feel overwhelmed with information? You might want to delay starting until you figure it all out, however that would be a mistake! Lets consider two investors Motivated Moe and Cautious Carl that want to start investing. Both will invest $1000 a year once they start. Moe does not know what to do but wants to start right now. Cautious Carl decides he will wait and figure out the best investment path before starting. Carl studies and after a year decides to invest in a portfolio of bond and stock index funds which returns 8% each years of investing. Moe starts out with a very conservative fixed investment and decides he will find better alternatives later. Moe has two years where he only earns 2% then he adds some bonds and has two years of 4% returns. Next Moe adds some stocks and ups his returns to 6%/year for another two years. Finally Moe discovers Carls portfolio and sticks with it. Who does better?
- Moe (blue) is always ahead for starting earlier!
Remember that time is money so even though it took Moe 6 years to find the right solution, starting one year earlier still puts him ahead of the game. So, how much did Moe miss out from his 6 years of experimenting? Only 4.5%, Carl’s caution cost him about 8%. Time is your most precious ingredient for investing, so it’s better to start conservatively today than it is to wait until you have the perfect plan.