Today’s investment message is about time. As we cover the basics it’s important to consider the way time impacts your investments. A small amount of money, invested wisely, can grow into a tidy sum over time.

Let’s say you you invest $1,200 at the end of every year for a total of 40 years.  At the end of that time you’ve invested $48,000.  If you’re able to earn 5% on your money, you’ll have $153, 407.70 at the end of that time.  However, if you invest $100 at the end of every month, in 40 years you’ll have $161,432.12.  The difference is the extra time those smaller, consistent deposits are in your account, earning money for you.  In our example, that’s an extra $8,000 just for changing the timing of your deposits.

This is the mechanism behind employer-sponsored retirement accounts.  You pay in weekly, bi-weekly, semi-monthly, or monthly through consistent payroll deductions.  Your money goes into your retirement account where it grows, tax-deferred, until you’re ready to draw it out.  The additional benefit, depending on the type of plan, is the inclusion of an employer “match,” an amount your employer pays into your account for participating.  You’re already earning on your investment!

Of course the example is simplistic.  I’m not trying to account for brokerage fees.  If you’re charged on each transaction those can add up.  Many investments don’t earn a consistent rate of interest like we’ve assumed in our example.  What I am attempting to show, however, is the way time can help your investment grow if you start now and stay steady.  A small amount of money, invested wisely, can grow into a tidy sum over time.

To your better wealth,