When Is The Best Time To Start Investing In Stocks?
When is the best time to start investing in stocks? Begin investing as early as possible in stocks and make sure to stick with it! The younger you start... the better! I cannot begin to emphasize this enough!!! Many investors today regret not investing in stocks when they were younger.
Get Started Investing At A Young Age
A young person could start with just $50.00 a month and build an impressive nest egg over time. Young people need to invest in stocks to meet their financial goals in the future. No other investment returns have beat stock returns over the long-term!
Why begin investing as early as possible? Because you want to allow compound interest a chance “to do its miracle!” Compound interest is interest compounded on your principal and also the accumulated interest of prior periods. With compound interest, an investor is making money off of their money! A win-win situation for the investor!
For younger investors, compound interest is the greatest tool ever helping them to “significantly” grow their money over time! However, it is never too late to get started investing in stocks! It is generally not a good idea, however, to invest in stocks with money you will need within 5 years or so.
First, Make Sure You Have An Emergency Cash Savings Account
It is, also, equally important to have cash emergency savings set aside. Establish this savings account before you start investing in stocks! Financial experts recommend 3-6 months of cash reserves (monthly income) set aside for emergencies.
A cash emergency savings account will ensure that you won’t have to use your credit cards for “unexpected” expenses. For example, you may experience an unexpected job layoff, need a new roof for your home, or require major dental work. Moreover, if you already own stocks these savings will prevent you from “prematurely” selling them to meet these unexpected expenses.
Your best bet for a cash emergency savings account would be in a money market account or a certificate of deposit. These accounts will keep your monies liquid and allow you to access your cash quickly when needed. Just be prepared for “lower” interest rates on these asset classes.
Next, Pay Down Credit Card Debt Before Investing In Stocks
Before you begin investing in stocks it is also not a good idea to have a lot of outstanding credit card debt. Pay off your credit card debt first. If you have more than one credit card, try paying off your highest interest rate card first.
I strongly recommend eliminating most, or all, credit card debt and building up an emergency cash savings before you begin purchasing stocks! According to Experian’s latest State of Credit report, “the average U.S. consumer holds about two bank-issued credit cards and carries a total balance of$5,551.”
Now Its Time To Begin Investing In Stocks
After you set up an emergency cash savings account and your credit card debt is paid up it is time to open a brokerage account and begin investing in stocks. Your best bet is to open a “discount brokerage account” online. Brokerage firms today offer free trading so there has never been a better time to start investing! Discount brokerage firms such, as E*Trade and Robinhood, will save you money. These firms let you buy and sell stocks with no fees whatsoever!
Full-service brokers, on the other hand, will provide you with financial advice, portfolio updates, retirement and tax planning. However, the downside is that many of the full-service firms charge hefty fees on the assets they manage. If you choose a full service broker make sure the commissions you are paying “per trade” are low. Low fees are very important as fees can erode your returns, significantly, over the long-term!
I, personally, am a “do-it-yourself” investor and perform thorough research on a company before purchasing its’s stock. I make my own educated investment decisions. I do not use a full-service brokerage firm or a financial advisor. An online discount brokerage firm provides me with what I need to invest successfully. And with my investment knowledge I find it unnecessary to hire a financial advisor.
In conclusion, the best time to start investing in stocks is when you are young. This will allow you the miracle of compound interest and also give your stocks a chance to grow. Earning compound interest is a surefire way to grow your wealth long-term with stocks! Long-term is the key! The “ideal” time to begin investing in stocks is after you have already established an emergency cash savings and, have little or no credit card debt outstanding!
