Delayed Investment Cost: Lost Compound Interest

Delayed Investment CostWhen looking for the best performing funds we sometimes overlook the basics of investing. The old adage that you should never put off till tomorrow what you can do today should ring true with all investors, especially those in the early stages of planning for their retirement.

It is a fact that earlier in our working lives other priorities prevent us from investing as much as we would like for our retirement. We tell ourselves that we will make up for lost time once the kids are out of the way and the mortgage paid off. Whilst you might make up the difference and eventually invest the same sums, what you get back could be staggeringly different.

Someone in their mid-20s paying in £100 per month will have invested £48,000 by the time they reach age 65. Compare this with someone that does nothing until they reach age 45 and then pays double the monthly premium to make up for lost time. They may have invested the same sum by the time they reach retirement but will find themselves sitting on completely different fund values.

The investor who waited 20 years before investing £200 per month will have seen their investment more than double (assuming 7% pa growth) to £90,000. Not a bad return, however the investor that started 20 years earlier, paying half as much each month, has a fund worth nearly 2½ more at £203,000.

No hidden tricks or insider fund knowledge just straight forward compound interest.

2016-10-22T15:11:22+00:00 February 23rd, 2013|Investments|0 Comments

About the Author:

Paul Milnes
Founder and Director of JPM Asset Management