Understanding the basics of compounding investing and diversification. Learn how starting early can make a significant difference in your retirement savings. 

If you're familiar with the Rolling Stones, you know they've been delivering heart-pounding rock 'n' roll for over half a century. Their iconic song, "Time is on my side," isn't just a classic tune - it's a perfect metaphor for compounding investing. Let's break it down for you.

What is Compounding Investing?

Compounding investing is a financial superpower that can make a world of difference in your life. Here's a scenario to help you understand it:

Imagine two friends, fresh out of college, deciding to save $4,800 each year for 20 years. Friend A starts investing from 2020 to 2040 and stays invested until retirement. Friend B begins investing in 2040 and continues until 2060.

Here's the twist - even though both invest $96K over 20 years, Friend A retires as a millionaire, while Friend B has just over $200k. Why? That's the magic of time in investing!

This example assumes an 8% annual return. The numbers change with the return rate - at 6%, Friend A would have $600K, and Friend B would have $186K. At a 10% return, Friend A would have an impressive $2.2M, and Friend B would have $300K. This illustrates how the return rate and the duration of your investment can significantly affect your final savings.

The Importance of Diversified Risk

JP Morgan reported that from 2007 to 2021, large cap equities returned about +10.6%, REITS +7.5%, bonds +4.1%, and cash 0.8%. To get these higher returns, you'll have to take some calculated risks with your investments.

So, here's a list of golden rules for all you young investors:

• Plan for the long haul – start saving now.
• Don't just hoard cash – investing and taking some risks is key.
• The earlier you start, the better – the power of compounding is seriously awesome.
• Stick to your plan, even when things seem a bit scary.
• Market ups and downs are normal – just ride it out.
• Don't put all your eggs in one basket – spread out your investments.

Consider Multi-Family Investments

Our expert advice? Consider investing in things like multi-family properties. These types of investments can often give you better returns than others. Plus, they add variety to your portfolio, which is a smart move. Commercial real estate has historically given better returns than both stocks and bonds, considering the risk.

Want to learn more? Just hit us up.

Remember, investing early and wisely can set you up for a secure and comfortable future. Start now, and let the power of time work its magic on your side.