When Is It Too Late To Start Investing?
If you’re in your mid-30s or early 40s, thinking that it’s too late to start investing, you’re not alone. Especially when we’re seeing more young adults in their 20s talking about their financial portfolio or diversifying their investments, you’re probably left feeling breathless with a huge sense of regret for not starting earlier.
What’s worse than that? Not understanding a single word that’s coming from someone that’s nearly half your age while seeing them decked out in branded items.
While it might have been the traditional belief that saving money is good enough for your retirement, the fact is that it isn’t, especially with the rising cost of living and inflation. At some point, the nagging questions arise: Am I too late to start investing now?
As cliché as it sounds, it’s never too late to start investing. In fact, the importance of investing is more pronounced as you age. So, whether you’re just about to celebrate your 30th birthday, or deep into your 40s or maybe even approaching your late 50s, here’s how to get started on investing!
The longer you wait, the less return you receive
Compound interest is one of the most common approaches to growing wealth over time, and it truly shows the power of letting time do the work for you. Compound interest is essentially letting your returns generate their own returns, and over a long period of time, regularly maintained compound investments can turn into sizable returns.
Think about it, in a scenario where you invest RM500 every month and receive a return of 6%, you can almost become a millionaire at 60 if you started at 20.
| Age you start investing | Total invested | Total portfolio at 60 |
|---|---|---|
| 20 | RM240,000 | RM996,000 |
| 30 | RM180,000 | RM502,000 |
| 40 | RM120,000 | RM233,000 |
| 50 | RM60,000 | RM81,700 |
| 60 | RM30,000 | RM34,800 |
Don’t let this table discourage you. Instead, understand that what matters is that you still have time and you can act on it! If you rely solely on your savings, rather than investing, you’ll likely fall behind inflation.
Read our article on why savings alone isn’t enough!
The older you get, the wiser you get…
The great thing about starting late is that you have much greater clarity about your financial habits, risk tolerance and long-term goals as compared to someone in their 20s. You should also be earning more, which means you’ll be investing more and much more aggressively.
1. Start with a clear plan
Use a roadmap (like the one we shared here) to take stock of your current financial situation. Consider clearing high interest debt, building a three to six month emergency fund and setting clear financial goals for yourself. Once these are planned, you can build a portfolio with intention.
2. Be consistent while not overcompensating
While it seems like a no-brainer to chase after plans providing higher returns to “catch up”, the higher returns often come with much higher risk. Especially with a shorter investment horizon, you’ll have less time to recover from your losses, increasing the risk of such plans.
Instead, be consistent, invest a fixed amount each month. Such a disciplined approach could significantly reduce the risk of entering the market at a wrong time, eventually helping you to smooth out market volatility.
3. Leverage low cost, diversified funds
You might want to consider investing in unit-trusts or exchange-traded funds (ETFs) as they offer instant diversification and are often managed by professionals. With the development of platforms like FSMOne,Wahed Invest or StashAway, investing has been made more accessible than it has ever been.
Time and discipline > timing the market
It’s time to stop thinking that “What if I invest now and the market crashes next year?”. No one can predict the highs and lows of the market, not even professionals. What matters more than timing the market is the time in the market. The longer and more consistent you are with investing, the more likely you are to ride out downturns and benefit from recoveries.
If you plan to work past the 60s phase into retirement, you’ll have 10 to 20 years if you start by 40 years old.
While the best time to start investing was yesterday, the second best time is today
So, will it ever be too late to start investing? No, only if you never ever start. The longer you wait, the harder the journey becomes and the less likely you are to benefit from investing.
Late starters just approach investing differently with a much different mindset and focus, and much more discipline and clarity.
Start now, and your future self will thank you for it.
