“People are always waiting for the right time to invest, and even the pros can’t get that right,” says Nela Richardson, an investment strategist at Edward Jones. If you’re asking yourself (or your friends, family, or other makeshift financial advisors) when to start investing, you’re implying that there’s a time when your investing efforts will be most effective. That’s not exactly true, even for investing experts; the buy low, sell high mantra really applies to short-term investments (mainly in the stock market), not the long-term investing everyone should plan for in order to build long-lasting wealth and financial security. “The power that retail investors [regular people, not professional investors] have, especially younger investors, is the power of time,” Richardson says. “It’s really about building an investment over time. That means sooner is better than later. If you have that mindset, then right now is the right time, and delaying is the wrong time. It’s as simple as that.” More long-term investments (think mutual funds and ETFs, or exchange-traded funds) build over time through interest, market growth, and continued investment. Just as retirement savings build over time, a long-term investment plan implemented over years can help money grow slowly but steadily, and with less risk. (Slow and steady wins the race and all that.) But the key to seeing positive results from those long-term investments is to start early, and soon. The sooner you start, the sooner you can start seeing returns, after all. So how do you know if you’re ready to start investing? First, consider your current financial situation, and remember that now isn’t actually the right time to invest if doing so will throw your day-to-day budgeting out of whack. You likely want to establish financial independence, unless the forces supporting you are willing to provide money for you to invest. You also want to make sure you have a bit of a financial cushion in an emergency fund to balance out some of the risk of investing. If your investments lose value, for example, you can wait out market fluctuations without needing to withdraw your money (and losing some of it in doing to) to live off of. Depending on your salary and debt-to-income ratio, you’ll probably also want to figure out how to get out of credit card debt if you have any. Investing early in life leads to greater financial gains later on, but that won’t help you much if the amount of money you owe (and the interest on it) is growing faster than your investments. Pay off high-interest debt first, then split your attention between slowly adding to investments and paying off low-interest debt. If, after all that, you still have money left over in your account to invest, start small. Richardson suggests figuring out what you want to achieve, planning out how much time your investments have to get you there, and then picking the right investment opportunities to make it all happen. If you want to buy a home or send a child to college in the next year (or few years), you may not have time to build serious wealth through investing before you have to pay for those large expenses, though there are ways you can work to catch up. If you have time, though, you’re in a good position to start investing. “Start now, start small, be diversified,” Richardson says. “Make sure you have enough funds so that you don’t take all the risk.” The key is to start investing before you think you need to—as soon as possible, if your budget can support it. Some people wait until life events force them to start investing, Richardson says—they wait until they realize they need to buy a home in the next year, or they get a big pay raise or bonus, and then wonder what to do with the extra money. “That’s not a financial plan, to wait for something to happen,” Richardson says. “Get in front of a life event. Don’t wait until something forces your hand to invest—invest early.”
