INSIGHTS

You've probably made a lot of decisions in the last few days or weeks. Once that decision was made you, or someone close to you, took action. And you – or they – probably did that as soon as possible. Maybe even immediately. Because it was likely that if you didn’t act quickly, you might miss the opportunity you want.

When it comes to things such as booking travel, we understand the cost of procrastination. We don’t want to miss out on the good deals, the best seat, the right price, or the ideal season at our destination.

But when it comes to our money, we can be a little slower to act. Perhaps we don’t believe we have enough money to begin an investment, or that it’s something only the wealthy do. We might consider investing difficult or complex – or that it’s risky. In fact, if you’re hoping for a secure financial future, it could be riskier not to invest.

"Start before you're ready"

Writer Steven Pressfield coined the quote, and for investing, it really rings true. That’s because the power of investing is in compounding returns – the reinvestment of the money you’re earning on your investment. The earlier you begin an investment, and the longer that money remains invested, the larger the reward. And, yes, the opposite is true. Delay beginning your investment by even a few years and there’s a cost – and it’s not just missing out on the money you’ve routed into the investment, it’s missing out on that money’s earning potential.

It can be difficult to visualise or quantify the value of compounding returns, because there isn’t really anything else we do in our lives where something works so hard for us without us lifting a finger. And unlike many other things in life, time can be kind to investments. In fact, a wise investor is not necessarily the person with the biggest house or the poshest car, it’s the person who started investing as early as they could.

Take the journey, choose your guide

Einstein called compounding returns ‘mankind’s greatest discovery’. He also reckoned that ‘the only source of knowledge is experience’, which is where we can help.

Investing is not a journey you need to take alone – in fact, it’s one that’s better with a tour guide. Our advisers' wealth of experience, built over decades right here in New Zealand, means you have expert advice at your fingertips, so that the investments you make are meaningful.

Like all good tour guides, our team will show you the greatest attractions, but might also steer you off the main thoroughfares and into an investment that’s a little different, a rising star, or something that’s a match with your own belief systems. You can ask questions to get a feel for what’s right for you.

What’s more, you don’t need to be wealthy – you just need to be willing. You can start with as little as a $1000 lump sum, or put away $100 a month.

What are compounding returns?

Compounding returns means reinvesting the money you make from your investment – this means you can earn income on your income. The most important aspect of compounding is time. The longer you reinvest your income, the more powerful the compounding effect can be.

The below illustration shows the difference 10 years could make.