I’m in my 20’s or 30’s – should I be investing?
Investing is a part of financial planning.
In order to grow our wealth we have to invest.
A demographic that often get lost in the world of financial planning world are those in their 20’s or 30’s.
Why?
Some feel financial planning is only for those more advanced in their careers.
With more assets than they have.
Some just don’t think they need it – read here.
The world of financial planners and advisors can be just as guilty at missing this demographic.
Some advisors only want to focus on those more advanced in their careers.
Those with greater investible assets or more disposable income.
There is more money to be made from that type of client.
Therefore the younger client can get missed, or even excluded.
Which is wrong.
The truth is, there is a great opportunity there for the younger client.
Instead of saving everything, resources should be allocated to investing.
Invest to benefit from the long term power of markets.
Let’s dive into this a bit more and outline the opportunities.
First of all, what exactly is investing?
Okay, think of saving as money going into the bank or credit union.
From the monthly pay, a certain amount is sent to a savings account.
Importantly, where it generates no return at present.
Investing is simply allocating some money to resources, with the expectation of generating a return.
Simply put, we look at other options, separate from the traditional banks and credit unions.
Especially options that are available to generate some return on our hard-earned money.
Why should we invest?
Clearly, there are a number of reasons people should consider investing.
In particular, the clearest reason at the moment is low-interest rates available from banks.
Inflation is another.
Inflation, coupled with low returns from banks, erodes the value of our money.
This is called the money illusion.
Understand this here.
Investing allows us to grow our wealth.
And at the same time generate inflation beating returns.
Unquestionably, when investing, we benefit from the power of compound interest.
Interest growing on interest.
Albert Einstein once said “Compound interest is the 8th wonder of the world’.
Furthermore, investing helps us meet other financial goals.
Goals such as purchasing a house, getting married, building an emergency fund or future holiday plans.
Should I save or invest?
When financial planning, it’s important to get the balance.
The balance between saving (bank, credit union) and investing.
Importantly, we all need money that we can access in the short term, this typically is in the bank.
Investing is a longer term strategy.
Markets in the short term can be volatile, take a look at January/February 2022.
So, when investing, think longer term.
The most important thing is getting the balance correct between saving and investing.
Read here to get an initial steer.
Or, this article on investing for beginners is a great starting point.
The power of investment markets
Investment markets are powerful.
Yet, they can appear scary.
They can appear scary because the media can lead us to believe this.
The media enjoy broadcasting when markets are down but give very little coverage when they’re doing well.
By the way, markets go up more than they go down.
This is why in the long term, markets are powerful.
And importantly, markets are on your side in the long term.
Let us take a look at the S & P 500 in isolation.
The S & P 500 is an index of 500 leading publicly traded companies in the USA.
Over the past year the S & P 500 has returned approximately 12%.
Broaden that timeframe to 5 years and it’s close to 85%.
That is the power of investment markets.
A key component of investing
The capacity to take risk (ie invest), is a key component of investing.
Once you are investing for a longer period of time, this increases your capacity for risk.
The reason is, the longer you’re invested, any potential short term downturn can be washed out.
In return for the risk you take by investing, you are rewarded with better returns.
I’m in my 20’s or 30’s – what does this mean for me?
Clearly, in your 20’s or 30’s, if you start investing, you have time on your side.
You could potentially be invested for another 60 years.
That, without a doubt, increases your capacity to take risk and invest.
By investing over the long term, you will be rewarded with the return.
Importantly, return that is much better than what is available to you by saving in the bank.
Let us look at an example.
Early 20’s
If you are 22 and are looking to your early 30’s to purchase your first home.
This will give you approximately a 10 year investment term.
You have one of two options to save for a deposit.
Option #1 – keep saving in the bank or credit union.
Here the money loses value.
The money illusion, combine inflation with no return equalling a decrease in your money.
Or Option #2. Start investing.
You have 10 years.
Without a doubt, investing for 10 years will yield you a greater return than the bank.
In turn, this will see you have more capital for your house deposit.
A larger deposit equals a lower mortgage.
Lower mortgage equals lower repayment which equals lower interest payable.
This is obviously a simplified example but clearly demonstrates the benefit of investing early.
How we help
At Fortitude Financial Planning, we want this type of planning to be available to the younger demographic.
If you are in your 20’s or 30’s, reach out to us.
Unquestionably, there is a significant opportunity here for you.
An opportunity to grow your wealth whilst planning for your future and at the same time living for today.
We will talk you through it.
Inform you as to how this works whilst keeping it simple and jargon-free.
We can discuss what it is you’re looking to achieve.
What you are looking to achieve in the short, medium and long term.
Only then will we make a recommendation on an investment plan for you.
Our investment portfolios are well diversified across asset classes, sectors and geographical regions.
We will make sure you retain cash accessible.
You will never be over exposed to one single stock or share.
This is called diversification which is designed to smoothen your investment journey.
As a relationship-based firm, it’s to our mutual benefit to create a relationship with you based on trust at a young age.
We can then serve you and advise you as you move through the various stages of your financial and life cycle.
Get in touch
Are you in your 20’s or 30’s?
Or do you have a family member who is in their 20’s or 30’s?
Then please request a callback.
Or drop me an email, francis@fortitudefp.ie.
Alternatively, give me a call, 086 0080 756 or access our diary here and book a call at your convenience.
We will have a no obligation chat with you initially, at our expense.
We can discuss the above and what you’re looking for.
Only then will we outline how we can help.
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Our blog posts are intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
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