If you’re sitting on the sidelines waiting for the stars to align before you start investing, here’s a gentle nudge: the perfect time rarely announces itself. Markets go up, down, sideways—and while timing can matter, time in the market matters more.
Think of investing like planting a tree. You don’t wait for the ‘perfect’ weather day to dig a hole and drop in a seed. You plant it, water it, and let nature do its thing. The magic happens quietly, over time.
Enter compounding—the quiet achiever when it comes to building wealth
Compounding is what happens when your money earns returns, and then those returns earn returns, and so on. It’s like a snowball rolling downhill: slow at first, then suddenly it’s massive. But here’s the catch—it needs time. The longer your money stays invested, the more powerful compounding becomes.
Compounding is like a snowball rolling downhill – slow and small to start.
Let’s look at an example of how compounding can work…
The $100-a-week investor
Let’s say you invest $100 every week—that’s just under $14.30 a day, less than a takeaway lunch. You stick with it for 25 years and, if your investments earn an average annual return of 8% (which is typical for long-term stock market returns), here’s what can happen:
- Total contributions: $130,000 ($100 × 52 weeks × 25 years at 8%)
- Future value after 25 years: $414,552[1]
- Total growth from compounding: $284,550 ($414,550 – $130,000)
Just by letting time and compounding do the work – that’s more than triple your contributions.
But here’s the kicker: if you wait just 5 years to start, and invest for only 20 years, your future value drops to $256,552[2]. That delay costs you nearly $160,000 in lost growth.
Of course, returns vary from year-to-year and these simple calculations are just to illustrate a point, but you get my drift.
So instead of chasing the perfect moment, start small. Automate it. Set up a regular investment—weekly, monthly, whatever works for you. That way, you’re investing through the ups and downs, and letting time and compounding do the heavy lifting.
You don’t need to be wealthy to start— but you do need to start to build wealth
Even $100 a month adds up. The key is not brilliance, but consistency. And automation helps you stay consistent without having to think about it.
So if you’re not sure when to start, start now. Thanks to compounding, your future self will thank you.
If you need advice on investments and aligning your money with your values, call me at Align Financial on (02) 9913 9995.
[1] Figures calculated using an online savings calculator at: https://www.saving.org/regular-savings/100/week?years=25&rate=8 Note that past investment returns may not be indicative of future results.
[2] Figures calculated using an online savings calculator at: https://www.saving.org/regular-savings/100/week?years=20&rate=8
