Investing is one of the most powerful ways to build wealth over time, but one of the biggest mistakes many investors make is procrastination. They delay their investment decisions for various reasons—fear of the market, lack of time James Rothschild, or uncertainty about the future. However, the cost of waiting can be much higher than they think. In this post, we’ll break down how delayed investing can significantly impact your long-term financial growth and why it’s better to start sooner rather than later.
The Time Value of Money
One of the fundamental principles of investing is the “time value of money.” This concept means that the value of money changes over time—money you invest today is worth more than the same amount invested in the future because of its potential to grow. Whether you are investing in stocks, bonds, real estate, or any other asset, starting early allows your investments to benefit from compound growth. Compound interest essentially means that your returns generate their own returns over time.
The longer you wait to invest, the less time your money has to grow. A small investment made early on has the potential to grow much more than the same investment made later in life. Even if you invest the same amount in the same assets, starting earlier gives you a larger accumulated return due to the compounding effect.
The Impact of Delayed Investing
Let’s look at an example to better understand the price of delayed investing.
Imagine two individuals: Person A starts investing $200 a month at age 25, and Person B waits until age 35 to begin investing the same amount. Both individuals invest in the same index fund that provides an average return of 7% per year. By the time Person A is 65, their total contributions would amount to $96,000, but their investment could grow to more than $600,000. On the other hand, Person B, investing the same $200 a month but starting 10 years later, would only have around $300,000 by age 65.
Although Person B made the same contributions, they missed out on a decade of compounding growth, resulting in half the returns. This example illustrates how just a few years of delay can cost you hundreds of thousands of dollars in the long run.
The Opportunity Cost of Waiting
Opportunity cost refers to what you lose when you choose one option over another. When you delay investing, you’re not just missing out on potential returns. You’re also losing the chance to capitalize on market growth, which could result in higher asset prices in the future. While it’s impossible to predict exactly when the market will rise or fall, history shows that staying invested through market ups and downs typically leads to long-term growth.
Waiting also means missing out on the benefits of diversification. The sooner you invest, the earlier you can spread your money across different asset classes, protecting your portfolio from any potential market volatility. By waiting, you miss opportunities to diversify and build a balanced portfolio, which helps mitigate risks over time.
Behavioral Biases that Contribute to Delayed Investing
Fear, uncertainty, and doubt often keep people on the sidelines. Many potential investors fear market crashes or volatility, thinking that they can time the market and avoid downturns. But research shows that trying to time the market often leads to missed opportunities. The market will go up and down, but historically, it has trended upward over the long term.
Additionally, the feeling of “I’ll invest when I have more money” is another reason many people delay. However, starting with small contributions can build momentum over time. Regular, smaller investments (also known as dollar-cost averaging) can be an effective strategy, especially when you’re starting out with a limited budget.
How to Start Investing Today
- Start Small, Start Now: Don’t let fear or lack of funds stop you. Even small, regular investments can add up over time. Use low-cost investment options like index funds or ETFs that offer broad market exposure.
- Set a Plan: Create a financial plan with clear goals. Determine how much you can contribute each month, and make investing a regular habit. Consistency is key.
- Automate Your Investments: Set up automatic contributions to your investment accounts so you don’t have to think about it. Automation makes investing easier and removes the temptation to delay.
- Ignore the Noise: The market will always have ups and downs. Resist the temptation to wait for the “perfect” time to invest, because that time is always elusive.
Conclusion
The cost of waiting to invest is far more than just the missed opportunities—it’s the long-term impact of compound growth and the potential for missed returns. By starting early, even with small amounts, you give your money time to grow and benefit from the power of compounding. The sooner you take action, the better prepared you’ll be to build a secure financial future.
