Time is precious. Some people say, “Time is money”. From an investment perspective, time is a catalyst for capital appreciation. Why is that? Deciding to make an investment today versus tomorrow can have a totally different outcome because of the multiplying effect. In fact, the earlier you start investing, the results will be more significant.

Here is an example: David starts investing at the age of 35. He puts in HK$2,000 into his portfolio every month over a 30-year investment horizon, which translates to HK$720,000 in total. Assuming the average return is 5% per annum, David would have around HK$1.67 million by the time he reaches 65.

But if he does so as early as age 25, the same amount of money he invested will take a longer time (10 years more) of compounding and the total amount of savings turn into HK$2.75 million when he turns 65. As we can see, the total amount of savings can be 65% higher. This suggests that the longer you invest, the more you can enjoy the power of compounding interests. And the earlier you start investing, the more you will benefit from capital appreciation and potential returns.

The table below illustrates the potential amount of David’s savings at age 65, assuming an investment return of 5% per
annum.