Here's Why Investing Early May Get You Into Trouble!
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Let's talk about why you should not invest as early as possible and how that may get you in trouble.
I’m sure all of you have heard that you should invest as early as you can as the earlier you start investing, the longer the duration you would have to compound your money and because of that, you would receive a significantly higher value at the end of your investment duration or you will need a shorter duration to achieve the same amount necessary.
Total investment amount necessary to produce $1 million:
Personally, I think that “investing as early as possible” is not a good piece of advice as it often results in a tendency for people to invest blindly without consideration of the risk that comes along with it and how it bodes with their risk tolerance based on their financial plans.
As a result, it is very common for people to invest a high proportion of their savings despite having a very short investment horizon. By doing so, these people end up exposing themselves to risks (e.g., market and volatility risks) that can be easily mitigated with a long enough investment duration.
During a bull market where prices are going up, such an action will not bring about any dire consequences.
However, during a bear market where prices are going down, they might be forced to sell off their investments at the worst possible time, thereby locking in their losses as they need the money to pay for their short-term plans.
As a result, I strongly believe that you should not invest as early as possible but instead only invest when you are ready.
So, how do you know if you are ready to invest?
You are ready to invest when you have set aside sufficient cash savings for things that are not negotiable such as property or marriage or things that are short term, that is less than 5 years.
Only after you have done that. then can you safely say that you are ready to invest what is left of your budget! That way, you are giving yourself a long enough investment duration which will reduce the level of investment risk exposed as seen from the historical performances of the market.
All of these can also be found in my eBook: “The Price Of Financial Freedom” which will provide you with a comprehensive guide to help you achieve financial freedom and live life on your terms in the shortest amount of time.
You can download a copy of it for free on my website:
If you do not know how to get started with your financial planning or if you do not have the time to manage your finances, you can consider engaging an Independent Financial Advisor who can help you make sense of the market, accelerate your progress and achieve financial freedom by 5 to 10 years earlier!
To find out more information about how you can benefit from my financial and insurance planning services, you can check out what I do on my website here:
Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).
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This article is meant to be the opinion of the author
This article is for information purposes only
This article should not be seen as financial advice
This advertisement has not been reviewed by the Monetary Authority of Singapore