Musings of a Young Investor: Starting Early vs Starting Late

I met an old friend for supper recently to catch up on each other’s lives. Naturally, the topic of investing came up, and my friend (who is the same age as I) made the following comment:

“Bro, why do you invest so young? Go enjoy your youth while you still can! No point investing when you’re young with so little amounts, you won’t get far. I’d rather spend money now travelling the world, eating good food, and start investing at the peak of my career where I can afford to invest much larger sums compared to now”

While there is nothing wrong approaching life that way, I was curious to find out whether is it true that A) starting with little amounts won’t get you far, and B) it is better to invest when you have larger sums of money.

Let’s have a hypothetical example:


Ben is 20 and is thinking of either making monthly investments now or waiting until he is 40 when he is at the peak of his earnings power to do so. Ben would like to accumulate $1m by the time he is 60. Assuming a rate of compounding of 10% per annum, how much would Ben need to set aside per month now or when he is 40 to achieve his financial goal?

Screen Shot 2016-06-03 at 9.30.16 PM


Using the compound interest calculator, Ben would only need to set aside $159 per month to accumulate $1m when he is 60 if he chooses to start now. However, if Ben chooses to start when he is 40, he would need to set aside $1,324 per month (8.3x more) to achieve $1m by 60. Furthermore, the total capital invested for Ben if he starts now would only be $76,320 compared to $317,760 (4.2x more) if he started at 40.

As you can see, thanks to the effects of compounding, starting young requires less monthly contributions, less total capital invested, and still enable us to achieve Ben’s financial goal. The obverse is just as true. Starting late would require more monthly contributions, more total capital invested, just to achieve the same financial goal.

In closing, we all have a good chance at financial freedom. The price we would need to pay is completely up to us. The earlier we start, the easier/cheaper it is to obtain financial freedom. Just like Warren Buffett, one of my major regrets when it comes to investing is not starting much earlier.

Kenny Chia

Value-Growth Investor

2 thoughts on “Musings of a Young Investor: Starting Early vs Starting Late

  • June 5, 2016 at 9:26 AM

    This is likely what will happen.

    Ben starts at 20, wanted to gun for 10% returns pa compounded over 40 yrs. Then first year he got 15% and was very happy and continued doing that. Second year he got 12%, okay still not too bad. Third year he got -20%, fourth year -60% and he throws up the towel and gives up and returns back to work, seriously working this time round.


    • June 6, 2016 at 9:17 AM

      Haha LP the learning curve is steep 😛 But I’m glad I haven’t had to face that outcome after 4 years.


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