It’s easy to put investing off. It will be easier to start when you get that raise (which you probably will). It will be easier to start when you have more time (which you probably won’t). Or when you feel like you’ve learned enough about what it even means. (Pssst: You don’t need to know as much as you might think.)
But here’s the thing: Every single day you wait could cost you about $100. Yes … a Benjamin. Every day. That’s why the best time to start investing is ... yesterday. But since that's not possible (yet), today is ideal.
Here are four charts that explain exactly why.
Why you should start investing literally right now
A little stock market history
The stock market goes up and down, but it’s returned an annual average of 9.6% since 1928.
Saving vs investing
Historically, simply saving your money has been much less powerful than investing over the long term.
The mathemagic of compounding
If you earn returns, and then those returns also have the opportunity to earn returns, that’s called compounding. Here’s an example of how compounding can work with investing returns.*
Why getting started ASAP is a big deal
Let’s say these two hypothetical women invest the same amount, but Alisha starts earlier.**
You really can't afford to wait another day. Get started here.
Source Ellevest. To calculate “about $100,” we compared the wealth outcomes for a woman who begins investing at age 30 with one who began investing at age 40 after having saved in a bank for 10 years. Both women begin with an $85,000 salary at age 30 and all salaries were projected using a women-specific salary curve from Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., which includes the impact of inflation. We assume savings of 20% of salary each year. The bank savings account assumes an average annual yield of 1% and a 22% tax rate on the interest earned, with no account fees. The investment account assumes an investment with Ellevest using a low-cost diversified portfolio of ETFs beginning at 91% equity and gradually becoming more conservative during the last 20 years, settling at 56% equity by the end of the 50-year horizon. These results are determined using a Monte Carlo simulation—a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest fees, inflation, and taxes on interest, dividends, and realized capital gains. We divided the calculated cost of waiting 10 years to invest, $341,181, by 3,650 (the number of days in 10 years). The resulting cost per day is about $93.47.
The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons.
We assume a 25-year-old woman would make a $250 deposit every month for 40 years. We assumed this woman's taxable investment portfolio was made up of 60% equity (aka the stock market) and 40% fixed income (aka the bond market). We also assumed that her portfolio would be rebalanced every year so that it stays that way. Then we used a Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest Digital fees, inflation, and taxes on interest, dividends, and realized capital gains.
Alisha and Beth aren’t real. We made them up so we can show you the kind of decisions people can make toward their goals. In other words, this is a hypothetical client scenario that doesn’t represent any Ellevest client, and it’s by no means individually tailored investment advice or assurance that a similar portfolio will have such performance over any period of time.
To calculate “Alisha’s” results, we used the “Mathemagic of Compounding” profile and projections described above. For “Beth,” we assumed a 45-year-old woman would make a $500 deposit every month for 20 years. Again, we assumed this woman's taxable investment portfolio was made up of 60% equity (aka the stock market) and 40% fixed income (aka the bond market). We also assumed that her portfolio would be rebalanced every year so that it stays that way. Then we used a Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest Digital fees, inflation, and taxes on interest, dividends, and realized capital gains.
Calculations:
*We assume a 25-year-old woman would make a $250 deposit every month for 40 years. We assumed this woman's taxable investment portfolio was made up of 60% equity (aka the stock market) and 40% fixed income (aka the bond market). We also assumed that her portfolio would be rebalanced every year so that it stays that way. Then we used a Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest Digital fees, inflation, and taxes on interest, dividends, and realized capital gains.
**Alisha and Beth aren’t real. We made them up so we can show you the kind of decisions people can make toward their goals. In other words, this is a hypothetical client scenario that doesn’t represent any Ellevest client, and it’s by no means individually tailored investment advice or assurance that a similar portfolio will have such performance over any period of time.
To calculate “Alisha’s” results, we used the “Mathemagic of Compounding” profile and projections described above. For “Beth,” we assumed a 45-year-old woman would make a $500 deposit every month for 20 years. Again, we assumed this woman's taxable investment portfolio was made up of 60% equity (aka the stock market) and 40% fixed income (aka the bond market). We also assumed that her portfolio would be rebalanced every year so that it stays that way. Then we used a Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results reflect a 70% likelihood of achieving the amounts shown or better, and include the impact of Ellevest Digital fees, inflation, and taxes on interest, dividends, and realized capital gains.
Disclosures
© 2023 Ellevest, Inc. All Rights Reserved.
All opinions and views expressed by Ellevest are current as of the date of this writing, are for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.
Information was obtained from third-party sources, which we believe to be reliable but are not guaranteed for accuracy or completeness.
The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities, and should not be considered specific legal, investment, or tax advice.
The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person.Investing entails risk, including the possible loss of principal, and past performance is not predictive of future results.
Ellevest, Inc. is an SEC-registered investment adviser. Membership fees and additional information can be found at www.ellevest.com.