These are the three steps to investing success: start soon, start small and keep it simple.
As the author of this column, I’m frequently asked what advice I would give to women who are just starting out as investors. So this month I thought it would be useful to condense my top tips with a set of FAQs that crop up most often.
How do I know when I’ll have enough money to invest? It’s not the amount that counts. Successful investing hinges on just three steps: Start soon, start small, and keep it simple. It’s critical to start saving as soon as possible to take advantage of the power of compounding, which over time can have a bigger effect than how much you invest and where you put the money.
Consider the case of two young women, Teri and Toni. At age 25, Teri begins contributing $2,000 a year to an IRA. She makes annual contributions for 10 years and then stops. Toni, on the other hand, waits until age 35 to start funding an IRA but makes regular $2,000 contributions for the next 30 years. If they both earn an average annual return of 8% in the stock market, who will have more money at age 65? Incredibly, Teri—a stunning illustration of compound interest working its magic.
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