Waiting To Invest Can Have A Worse Impact Than Making A Bad Investment

Waiting To Invest Can Have A Worse Impact Than Making A Bad Investment
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It’s common knowledge that the best time to start investing is now. However, once you’ve started to build your savings, how can you maximise your return? Finance blog The Simple Dollar suggests that fretting over one or two per cent won’t have a significant impact over the short term.

Photo by James Robinson

When it comes to picking an investment, we all want to get the most bang for our buck. To that end, we might spend months waiting it out and watching the markets before choosing our options. The Simple Dollar points out this might not be a wise idea:

[I]t will take a very long time for a poor investment choice to have a significant negative impact on you, but it doesn’t take much time at all for the choice to not invest to have a negative impact on you.

Let’s say, for example, that you’re able to put aside $100 a month for retirement. You can either start putting money aside right now in a investment chosen at random that earns 6% per year (on average), or you can give it six months of study and choose a much better one that returns 7% per year.

How long before the 7% investment catches up with the 6% investment?

A little over 11 years.

Investment choices are more complex than that (for retirement money, putting funds into superannuation has tax advantages you need to factor in as well, for instance). But waiting for the “perfect moment” to dive in may have worse consequences than investing now and switching later if you have to.

When Should I Invest? [The Simple Dollar]