Retirement is a great use case for investing. Generally your investment goals should have you investing with a long term goal in mind like retirement.
Starting early will mean your investment has the time to weather the market and compound with interest over time. According to Business Insider Nerd Wallet run a common risk assessment called the Monte Carlo simulation which ran 10,000 possible outcomes for investors based on historical data and the volatility of those returns.
It found that a 25 year old investing 15% of their salary each year had over a 99 percent chance of at the very least maintaining their initial investment over 40 years. Investors also had a 95% chance of earning nearly three times their initial investments where traditional savers had a less than 3% chance.
Not one of the ten thousand simulations resulted in investor losing their initial investment entirely.
The analysis shows that the effects of even significant downturns can be smoothed out by a long term investment strategy. While there’s no guarantee of getting those historical returns in the future the value of investing over a long period of time is significant.
With time on your side you’ll want to create a diverse, balanced portfolio with a goal of growth rather than income. That way any earnings will be reincorporated into the portfolio creating a snowball effect called compounding.
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