In 1964, The Rolling Stones released the hit single “Time Is on My Side.” Who knew they were talking about personal finance?
For The Rolling Stones, the song was about confidence and patience in love. For investors, it reflects something equally powerful: the confidence and patience required to pursue long-term financial goals like retirement.
As a young investor, you have one tremendous advantage on your side: time.
The earlier you begin saving and investing, the longer your money has to grow. Over time, investment earnings can begin generating earnings of their own—a process known as compounding. The result can be surprisingly powerful.
The Power of Compounding
Many people underestimate the impact of compound growth, which is why it’s worth illustrating with a simple example.
Imagine you start with $1,000 in an investment account earning a hypothetical 5% annual return. If you contribute an additional $1,000 each year, after 30 years your account could grow to approximately $69,671. Of that amount, only $30,000 came from your own contributions; more than $16,000 was generated through compound growth alone.¹
What makes compounding so powerful is that the growth continues building on itself year after year—even if contributions eventually stop.
The Power of Starting Early: Let Time Do the Heavy Lifting
When it comes to building wealth, most people focus on two variables:
- How much they save
- The rate of return they earn
Both matter. But there is a third factor that is often even more important: time.
Compound growth disproportionately rewards investors who start early. In fact, someone who begins investing sooner can potentially accumulate more wealth than someone who contributes far more money later in life.
Consider these two hypothetical investors:¹
The Early Starter
- Invests $10,000 per year for 10 years
- Stops contributing entirely after that
- Total contributions: $100,000
- Ending balance at age 62: $850,608
The Late Starter
- Waits 10 years before beginning to invest
- Contributes $10,000 per year for 30 years
- Total contributions: $300,000
- Ending balance at age 62: $888,298
The comparison highlights one of the most important lessons in investing: time can be more valuable than the amount invested.
The Early Starter contributed only one-third as much money as the Late Starter yet ended with nearly the same account balance. Why? Because the Early Starter gave compounding an additional decade to work.
Meanwhile, the Late Starter spent decades trying to catch up. Even after contributing three times more capital, the final outcome was only modestly higher.
The lesson is clear: in the world of investing, a smaller amount of money invested early can often outperform a larger amount invested later.
Time is not just helpful when investing—it may be your greatest financial asset.
1 This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.