Many people are afraid to get started investing. Some are scared to lose money, feel they don’t have enough money or it can be due to lack of knowledge.

Investing is not hard and anyone can do it. You can start investing with any amount money and the earlier you start, the better. We’ll explain the fundamental concepts, lingo, types of investments and the basics of how to start investing. You got this!

No Time Like The Present

Well, there is a better time than right now to start investing and that time was when you were 18, the age you have to be to open an investment account. But most of us didn’t have money on our minds when we were 18 so the second best time to start investing is now. Right now.

The Two Magic Ingredients

You don’t need a lot of money to invest or some insider information or innate intuition regarding what to invest in to make money in the market. What you do need are the two magic ingredients of compounding interest and time.

Compound interest is interest you earn on your interest. That’s hard to understand, here is an example.

If you invest $10,000 at 7% interest for 20 years without adding anything to the initial investment, that $10,000 will turn into $38,696.84.

You didn’t do anything to earn that extra money, you didn’t even add anything to your initial investment, and like magic, you end up with an additional $28,696.84! That’s the power of compounding interest.

The other ingredient is time for the compounding interest to do its thing. There is no substitute for time when it comes to growing your money. Don’t believe us? Take a look at the numbers.

Example 1:

Ryan invested $1,000 a month from ages 25-35. He didn’t invest any additional money, but he didn’t touch the $120,000 invested until he retired at 65.

Example 2:

Elizabeth got a later start. She invested the same $1,000 a month for ten years at 7% but did not start investing until she was 35. No further contributions but the money was left to grow until Elizabeth retired at 65.

Example 3:

Amanda got a really late start. She invested $1,000 a month for ten years at 7% but not until she was 45. No additional investments and the money grew by 7% until Amanda retired at 65.

So how did each of our investors do?

Each invested the same amount of money, $120,000 for the same amount of time, ten years, at the same rate of return, 7%.

Ryan: $1,444,969

Elizabeth: $734,539

Amanda: $373,407

The numbers speak for themselves. The only thing different between these three investors is the amount of time their money had to grow. There is no substitute for time when it comes to investing.

Investing 101

Investing can be complicated, timing the market, short selling, day trading, but it doesn’t have to be, and you don’t have to know anything to get started. But you want to understand some basics of investing.

Common Types of Investments

When many people hear the word “investing” they think of stocks, and while stocks are one type of investment, they are not the only kind. These are the most common types of investments.

Stocks: When you buy a share of stock, you are buying a tiny bit of a company. Stock prices follow a company’s ups and downs and those of the broader economy.

Bonds: Buying a bond is lending money to the entity that issued it.