If you’re a recent graduate who was lucky enough to get a check from sweet old Aunt Jane, you may want to resist the temptation to splurge on a vacation or that fancy tech gadget you’ve been craving to buy. Instead, invest the money to take advantage of the power of compounding returns — time is definitely on your side.
Charles Sizemore, who manages the Dividend Growth portfolio, was recently interviewed by MainStreet for a story on the best financial advice for recent grads:
The best lesson that new graduates can learn is that it is never too early to start saving since the largest asset individuals have is time, said Charles Sizemore, a CFA based in Dallas and a portfolio manager on Covestor, the online investing marketplace.
“Even middling returns can compound into a small fortune if you start early enough,” he said. “Don’t blow that money you get for graduation.”
Instead of spending $499 for a new iPad Air, a recent graduate could forgo the iPad and invest the funds.
Over a 30-year time horizon, that $499 would grow to $3,798 if it was invested at a 7% annualized return, Sizemore said. Even if the markets generate “ho-hum” returns over the next 30 years that are below their long-term averages at a 5% annualized return, that $499 would still more than quadruple to $2,156, he said.
Read the full article at MainStreet.