The Dow Jones Industrial Average index is hovering near an all-time high, and many investors are worried that the stock market is too overvalued.
But the key trick to wealth management, which is misunderstood by so many young investors, is that time is your friend. So if you’re in your 20s, the cost of not investing for your retirement could be more costly in the long run than the ups and downs of the market over the course of your life.
Just holding cash could end up costing Millennials between $3.3 million and $4.0 million in investment returns, according to a recent study from Nerdwallet . The Website’s analysis assumed an investor earning $40,000 annually saved 15% of his or her gross salary.
The truth is that you don’t need to earn much to see your savings grow. Investing as little as $100 per month could potentially turn into a nest egg of $150,000 after 30 years, thanks to the power of compound interest. The diagram below shows how this is possible.
In the long run, even though markets go up and down, you’re still likely to earn a positive return. For example, even if you had bought stocks in the tech-oriented NASDAQ right before the dot-com bubble burst in February 2000, your total return at the end of July, 2017 would be 60.3%, or roughly 2.75% annually.
Similarly, the S&P 500, a basket of stocks of some of the largest U.S. companies, has returned approximately 8% per year on average for the past 30 years. So there are clear advantages to considering stock market investing, rather putting your cash in a savings account, which pays little interest.
Investing doesn’t have to be difficult. Stash is an easy and effective way for anyone to access the stock market with Exchange Traded Funds, or ETFs, which can help build a diversified retirement portfolio.
With Stash, you can start investing in just two minutes, with as little as $5. And our AutoStash tool can help you invest automatically, so you can take advantage of the power of compound interest without worrying if the market is up or down. In fact, Stash is offering new users $5 to get you started. Remember, anyone can save and invest. All you have to do is start. You can claim your $5 credit here.