海角大神

One of the biggest fears that people have when they begin investing is that they鈥檙e going to make a 鈥渄umb鈥� choice and not get the best investment returns that they could get. They fret and worry about this fund or that fund or buying real estate or buying bonds and that fret and worry and indecision keeps them from investing at all.

That鈥檚 a giant mistake, and here鈥檚 why:聽it will take a聽very聽long time for a poor investment choice to have a significant negative impact on you, but it doesn鈥檛 take much time at all for the choice to聽苍辞迟听invest to have a negative impact on you.

Let鈥檚 say, for example, that you鈥檙e 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?聽

A little over 11 years.

A similar example: let鈥檚 say you can spend an hour a week fretting over your investments to bump them up another 1% 鈥� from, say, 7% per year to 8% per year. Alternately, you can spend that hour finding ways to cut spending and you manage to cut out $25 per month, which you can then invest.

How long before the investment studying catches up with the frugality?

A little over 23 years.

The point is this:聽when you are first beginning to invest, it is far more important to聽start now聽and to聽put away as much as you can聽than it is to find the perfect investment.

Let鈥檚 say, though, that you鈥檇 like to invest but you also have some debts stacked up in front of you. What then?

You should always make the choice that will give you the best long-term return on your dollar. For that, you should assume that stock investments will give you about 7% per year.

So, your first step is to聽stop accumulating new debt.聽You should not incur any more personal debt if you want to get ahead.

The next step is to聽put money into retirement up to the employer鈥檚 match 鈥� assuming your employer offers a match.聽Why? That鈥檚 an immediate 50% or 100% return on your money. If your employer matches your savings dollar for dollar, then that鈥檚 an immediate doubling of your money. Grab that first.

After that,听pay down high interest debt.聽I view anything above about 7% right now as high interest debt. Usually, that means you pay off things like credit cards, but you wait on things like car loans and house loans.

础蹿迟别谤听that,听invest in retirement up to at least 10% of your income 鈥� and at least 15% if you feel you鈥檙e behind.聽As I said above, do it聽now. Choose the best investment you can find quickly and start there 鈥� if you want to change it later, you can do so quite easily, but you can never make up for lost time.

The key thing is to聽start now聽and to聽contribute as much as you can, using frugality to your advantage. Without those two tactics, you鈥檒l quickly find yourself years behind where you would have been.

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