Begin Early to Invest - Why a Stitch in Time Will Prove Explosive for You

This is probably the most important piece of advice anybody will ever give you. It bears repeating: asking you to begin early to invest - whether in stocks or other financial assets - is about the most precious word of advice you will be getting from me or anybody else regarding your financial success. Heeding that advice will also prove one of the most important steps you will ever take to position your life for financial stability and, plainly, wealth. It will therefore only be apposite to ask for your undivided attention. The point being made in this piece is that the much-vaunted benefit of investing can be explosively amplified through accelerated timing. Simply put, by commencing your investment action early in life, you position yourself to enjoy a huge multiplier benefit. The reason is simple: time has the uncanny ability to generously grow your investment. This is so because time allows the 'magical' impact of compounding to power up your investment.

In Black and White
Let's not waste words on this subject and go straight for figures that can bring a graphic demo of what is being said. We will look at a hypothetical case which is, however, reflective of common real-life occurences.

• Start Small Early, Beat Big Late-starter
  Think of two guys Jide and Stanley, who left the university the same year, and luckily both got jobs imediately after their NYSC service. Stanley was however more fortunate to land an oil company job (parental connection did the magic!). Jide's was with a stockbroker, where he got paid a tenth of what Stanley was earning. For Jide, however, he quickly learnt lessons in investing, and not having a wealthy background, got determined early to transform his life, even with his relatively poor earning. In contrast, his school-mate, Stanley, who earned a lot of money, didn't quite undertand investment. How did they spend their earnings. Jide committed to saving N2,000 of his monthly salary (actually 5%) and investing N24,000 annually. Stanley had a lot of fun and owned all sorts of cutting-edge gadgets and devices: hot cars, high-tech home electronics, mobile devices and all.
  
  It took 20 years before Stanley got a wake-up call, after a well-repected superior invited him and really dressed him down about his scandalous spending profile. The message sank. He was so touched that he immediately invested N500,000. He kept on at N400,000 annually (from monthly savings of N33,000) for the nest 10 years. Meanwhile, Jide had raised his annual investment to N36,000 following a raise, in the sixth year and again to N60,000 in the twefth year. He got a higher-paying job in the twentieth year and boosted his annual investment to N120,000. Now, let's see a chart of these guys' investments and how they ended up at 30 years of employment, assuming returns rate of 15% over the entire period:
  
  

Jide's Investment Profile						Stanley's Investment Profile
Yr	Annual Accretion	Total Capital N	Annual Interest N	Year's Closing N		Annual Accretion	Total Capital N	Annual Interest N	Year's Closing N
1	24,000	20,000	3,000	23,000		0	0	0	0
2	24,000	47,000	7,050	54,050		0	0	0	0
3	24,000	78,050	11,708	89,758		0	0	0	0
4	24,000	113,758	17,064	130,821		0	0	0	0
5	24,000	154,821	23,223	178,044		0	0	0	0
6	36,000	214,044	32,107	246,151		0	0	0	0
7	36,000	282,151	42,323	324,474		0	0	0	0
8	36,000	360,474	54,071	414,545		0	0	0	0
9	36,000	450,545	67,582	518,126		0	0	0	0
10	36,000	554,126	83,119	637,245		0	0	0	0
11	36,000	673,245	100,987	774,232		0	0	0	0
12	60,000	834,232	125,135	959,367		0	0	0	0
13	60,000	1,019,367	152,905	1,172,272		0	0	0	0
14	60,000	1,232,272	184,841	1,417,113		0	0	0	0
15	60,000	1,477,113	221,567	1,698,680		0	0	0	0
16	60,000	1,758,680	263,802	2,022,481		0	0	0	0
17	60,000	2,082,481	312,372	2,394,854		0	0	0	0
18	60,000	2,454,854	368,228	2,823,082		0	0	0	0
19	60,000	2,883,082	432,462	3,315,544		0	0	0	0
20	120,000	3,435,544	515,332	3,950,876		500,000	500,000	75,000	575,000
21	120,000	4,070,876	610,631	4,681,507		400,000	975,000	146,250	1,121,250
22	120,000	4,801,507	720,226	5,521,733		400,000	1,521,250	228,188	1,749,438
23	120,000	5,641,733	846,260	6,487,993		400,000	2,149,438	322,416	2,471,853
24	120,000	6,607,993	991,199	7,599,192		400,000	2,871,853	430,778	3,302,631
25	120,000	7,719,192	1,157,879	8,877,071		400,000	3,702,631	555,395	4,258,026
26	120,000	8,997,071	1,349,561	10,346,631		400,000	4,658,026	698,704	5,356,730
27	120,000	10,466,631	1,569,995	12,036,626		400,000	5,756,730	863,509	6,620,239
28	120,000	12,156,626	1,823,494	13,980,120		400,000	7,020,239	1,053,036	8,073,275
29	120,000	14,100,120	2,115,018	16,215,138		400,000	8,473,275	1,270,991	9,744,266
30	120,000	16,335,138	2,450,271	18,785,409		400,000	10,144,266	1,521,640	11,665,906
	2,136,000			18,785,409		4,500,000			11,665,906



• Check the Figures, See the Picture
  First, note the point that Stanley was just a late-starter, but in absolute terms invested much more than Jide - in fact 2.1 times (210%) of Jide's (N2,136,000 : N4,500,000). However, Jide ended up with a lot more money (N18.79 million : N11.67 million) for his investment of less that 50% of what Stanley eventually invested. You see the effect of early investment? Again Jide worked under less pressure, spreading his saving (and investment) over time, at bearable figures: first N2,000/month, then N3,000/month, later N5,000/month and finally N10,000/month. These figures are realistic even for a low-paid worker, indicating that nobody should really be poor. Most well-paid jobs place you in a position to invest multiples of what Jide did, meaning you should end with multiples of N18.79m over a 30-year work span. do's. Stanley was lucky that he eventually got jolted into action, but what if he wasn't? Or no longer had a job that empowered him to load up at an accelerated pace of investment? Suppose Jide stretched himself a bit more and plugged in higher figures initially? You can do the math and see what a huge impact it would have left. If he invested in stocks over that entire period, we possibly won't be working with 15% returns. Our stock market has averagely turned out much higher rates of returns for many years running.

Act, Don't Delay
This is graphic enough, don't wait to act. If I knew this much when I started out in employment, it would have been a different story. Do you want to get this messsage a bit late, like Stanley, like me? Or never, like some unfortunate guys? No matter your level of earnings, you could (and should) take control of your finances and apply simple, actionable principles and investment vehicles to create the wealth you need. Jide's N19m isn't too much money, granted. But many finish a 30-year work life without such investment value in their pocket. Jide, too, could have done better, though it's gratifying that he had the foresight to achieve the much he did. Don't let the lesson here slip through your hands. No better advice!

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