If you’re a recent graduate who was lucky enough to get a check from sweet old Aunt Jane, you may want to resist the temptation to splurge on a vacation or that fancy tech gadget you’ve been craving to buy. Instead, invest the money to take advantage of the power of compounding returns — time is definitely on your side.
The best lesson that new graduates can learn is that it is never too early to start saving since the largest asset individuals have is time, said Charles Sizemore, a CFA based in Dallas and a portfolio manager on Covestor, the online investing marketplace.
“Even middling returns can compound into a small fortune if you start early enough,” he said. “Don’t blow that money you get for graduation.”
Instead of spending $499 for a new iPad Air, a recent graduate could forgo the iPad and invest the funds.
Over a 30-year time horizon, that $499 would grow to $3,798 if it was invested at a 7% annualized return, Sizemore said. Even if the markets generate “ho-hum” returns over the next 30 years that are below their long-term averages at a 5% annualized return, that $499 would still more than quadruple to $2,156, he said.
Read the full article at MainStreet.
- John leads the editorial organization at Covestor, including the production, editing and distribution of content. He has extensive experience with creating high quality financial content and his work has appeared in several national newspapers and print publications, including The Wall Street Journal, Washington Post and the Chicago Tribune. Previously, he covered personal finance for MarketWatch.com and ETFtrends.com. In his early career, John was an editor for IndexFunds.com and IndexUniverse.com. From 2004 to 2011, he also wrote a weekly ETF Investing column for Dow Jones. He earned a BA from Middlebury College, and an MFA in Writing from the University of San Francisco.