When it comes to investing, there’s one piece of advice that stands the test of time: start early. Whether you're saving for retirement, a child’s education, or building long-term wealth, beginning sooner gives your money the one thing it needs most—time. And with time on your side, the power of compounding can turn even small, consistent contributions into significant wealth.

But before diving into the markets, there are a few key steps to take to ensure you're ready to invest with confidence.

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Are You Ready to Start Investing?

While the general rule is “the sooner the better,” it’s important to lay a solid financial foundation first. Ask yourself these four questions:

1. Have you set financial goals?
   Investing is most effective when it's aligned with a clear purpose. Whether you're planning for a home, retirement, or a major life milestone, knowing what you're working toward will guide how you invest. Your investment strategy should reflect your timeline, risk tolerance, and desired outcomes.
2. Have you built an emergency fund?
   Before you invest, it’s wise to have a safety net. Life is unpredictable, and an emergency fund—typically three to six months’ worth of expenses—gives you peace of mind. It means you won’t need to pull from your investments if unexpected costs arise, keeping your long-term plan intact.
3. Have you assessed your risk profile?
   Investing comes with ups and downs. Understanding your capacity and willingness to take on risk will help shape your portfolio. Are you more conservative and prefer stable, lower-return investments, or are you comfortable with more volatility for potentially higher returns? Knowing your comfort level is essential.
4. Have you paid off high-interest debt?
   Investing while carrying high-interest debt can be counterproductive. Paying off these obligations first can free up cash flow and reduce financial stress. Once those debts are under control, you'll be better positioned to take full advantage of investing.

If you’ve answered yes to these questions, you’re likely ready to begin. And if you’re still working through them, don’t worry—planning now puts you on the right track.

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The Power of Starting Early

Time is the greatest ally for investors. By starting early, you allow your investments more time to grow, and more importantly, more time to compound. Compounding is the process where your investment earnings generate their own earnings. Reinvested profits build upon themselves, and over the long term, this can lead to exponential growth.

To illustrate the effect, consider the Rule of 72—a quick way to estimate how long it takes for your money to double. Simply divide 72 by your expected annual return. For example, with a 6% annual return, your money would double in roughly 12 years. The earlier you start, the more “doubling periods” you can benefit from.

Even modest contributions can grow significantly over time thanks to compounding. For example:

• Starting at age 25 with $200/month at a 6% return could grow to over $370,000 by age 65.
• Waiting until 35 to start under the same conditions results in only $190,000—almost half the value.

The difference isn’t how much you invest—it’s when you begin.

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Opportunities for Growth

Starting early also means you have time to explore a range of investment options and benefit from long-term market growth. While traditional savings accounts offer security, they typically don’t keep pace with inflation or offer meaningful returns. Investments like stocks, bonds, and various funds open the door to greater potential:

• Stocks: Offer strong long-term growth potential, but are often volatile in the short term.
• Bonds: Generally more stable than stocks, with lower but more predictable returns.
• Cash and Equivalents: Include GICs and money market funds. These are highly stable but offer minimal growth, and may not outpace inflation.
• Alternative Investments: Such as cryptocurrencies, private equity, or hedge funds, can offer high returns but are typically volatile and less liquid.

The key advantage of starting early is that you don’t have to rush or take unnecessary risks. With time on your side, you can ride out short-term volatility and stay focused on long-term goals.

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Compounding in Action

Let’s look deeper at why compounding is so powerful:

1. Exponential Growth
   As your investments earn returns, and those returns are reinvested, you benefit from a snowball effect. This “earning income on income” allows your portfolio to grow faster the longer it remains invested.
2. Reinvestment Is Key
   Leaving your earnings in your investment accounts to grow further accelerates this process. Every dollar reinvested becomes another building block in your portfolio.
3. Dollar-Cost Averaging
   By making regular contributions, regardless of market conditions, you smooth out the price you pay for investments over time. This reduces the impact of market swings and supports long-term growth.
4. Time Reduces Risk
   While markets can be volatile in the short term, history shows they tend to trend upward over longer periods. The earlier you start, the more time your investments have to recover from downturns and capitalize on gains

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Build Your Future Today

The biggest regret many investors have? Not starting sooner.

Starting early gives your money time to grow, helps you weather market fluctuations, and allows compounding to work its magic. Beginning sooner also promotes tax-efficient growth by allowing you to defer taxes and fees—especially when invested in accounts like an RRSP or TFSA.

Whether you’re just getting started or reviewing your current plan, partnering with a professional can make all the difference. The portfolio managers at Matco Financial offer personalized guidance to help align your investments with your financial goals. If you want to understand how your portfolio supports your long-term plan—and how to take full advantage of tax-efficient growth through strategies like RRSPs and TFSAs—our team is hereto help. Contact us to start building your future with confidence.