The word “investor” may make you think of someone wearing a suit walking down Wall Street, but personal finance author Farnoosh Torabi wants you to realize: You, too, may well be an investor.
“Look, if you have a 401(k), you’re an investor — and own that position, be proud of that,” says Torabi, host of the “So Money” podcast and and cofounder of financial education pop-up She Stacks.
The myth that you’re not an investor even though you’re planning for retirement by using a 401(k) is one that Torabi is eager to dispel. You may feel distanced from the investing process, since contributions are generally taken out of your paycheck and invested in lower risk funds on your behalf, but you’re still an active participant in the market.
“You are invested; you are invested in stocks, you are invested in bonds,” Torabi says. It’s important to embrace your role as an investor, she says, and start investing as early as possible, using as much money as you can, to achieve your long-term goals.
Torabi recently sat down with Grow to dispel some of the other myths she often hears from young investors. Check out the video for some of the most common.
Video by Courtney Stith
Another myth, Torabi says, is that investing is only for the wealthy. The reality is, if you want to have wealth someday, you need to start investing as early as possible, even if you can only put aside a little cash now.
Small contributions can add up to huge amounts over time. Say you were to invest just $50 each month starting at the age of 20. Assuming average annual returns of 6%, you’d have more than $138,000 by the time you’re 65.
You have compounding interest to thank for a bulk of those gains. With compounding, you earn interest on both the money you invest and on the returns you accrue over time.
“The beauty of compounding growth is that the earlier you start, the more you can end up with,” Torabi says. So embrace your role as an investor — and fight the urge to push off investing until you earn more money or because retirement seems so far away, she adds.
“We often say that you have to be wealthy to invest — that’s not true,” Torabi says. “But you do have to invest to be wealthy.”
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