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! “The younger you start... the better!” I cannot begin to emphasize this enough!!! Many investors regret not investing in stocks when they were younger!
A young person can 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!
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.
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. And, preferably, little, or no, credit card debt “before” you begin investing in stocks.
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 could be in a money market account or a certificate of deposit. These accounts will keep your monies “liquid” allowing you to access your cash quickly when needed. Just be prepared for “lower” interest rates on these asset classes.
Before you begin investing in stocks it is also not a good idea to have a lot of outstanding credit card debt. I strongly recommend eliminating most, or all, credit card debt and building up an emergency cash savings before you begin purchasing stocks!
After the above monies are set-aside it is time to open a brokerage account and begin investing in stocks. Your best bet is to open a “discount brokerage account” online, such as E*Trade, TD Ameritrade or Robin Hood. Robin Hood is a firm that offers free trading. Discount brokerage firms will save you money as they are cheaper than full-service brokerage accounts.
Full-service brokers, on the other hand, will provide you with financial advice, portfolio updates, retirement and tax planning. However, many of the full-service firms charge hefty fees on the assets managed.
Brokerage fees are incurred when you buy or sell a company’s stock. 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 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 the majority of what I need to invest successfully.
In conclusion, the best time to start investing in stocks is when you are young. This will allow you the miracle of compound interest. Earning compound interest is a surefire way to grow your wealth long-term with stocks! The “ideal” time to begin investing in stocks is when you already have emergency cash savings set aside and, little, or no, credit card debt outstanding!