When Is a Good Time for Immigrants to Start Investing?

The short answer: now

The answer is always going to be now, no matter what time it is.

The way you actually build wealth in the stock market is investing over time. Having time for your money to grow is how you get the growth.

There are a lot of people on the internet talking about getting rich fast and day trading. The kind of investing we teach is the kind most Americans build wealth through, like the 401(k) accounts they get through their job. It’s standard, long-term growth. It’s not as sexy because you have to be patient, but this is how you can build hundreds of thousands, even millions of dollars over your lifetime, just investing a small amount consistently every month.

What 100 years of the S&P 500 shows us

The S&P 500 is an index fund of the top 500 companies in the U.S. Historically, the U.S. stock market has performed better than stock markets in other parts of the world, including Europe. A lot of Europeans actually try to invest in the U.S. because they can get higher returns.

Looking at the S&P 500 over the past ~100 years, since 1927, when you average it out, it’s continuously going up over time. That’s the wave we’re trying to ride.

In the short term, the market goes up and down. That’s normal. It’s cyclical, kind of like ocean waves or the seasons. It moves with changes in the economy and changes in politics. You can see a big dip in the 1930s during the Great Depression, and another around the 2008 housing crash.

But the takeaway is it has always gone back up. We can’t guarantee what will happen in the future, but to make an objective, informed investing strategy, we can rely on data and statistics of how it has performed over a long period.

What $200 a month can grow into

You can try this yourself. Go to Google, type in “investment calculator,” and use the calculator.net one.

We use 8% as the rate of return. Over 100 years, the market has averaged between 7-12% every year, which is really high. You can’t get that in a bank account, a CD, or a high-yield savings account, and it’s hard to consistently beat even by day trading. We like 8% as a conservative number, so we underestimate and get pleasantly surprised later.

Starting with $0 and investing $200 a month at 8%:

After 7 years

• You put in: $16,800
• Free money (interest): almost $6,000
• Total: over $22,000

After 10 years

• You put in: $24,000
• Free money (interest): almost $13,000
• Total: about $37,000

After 30 years

• You put in: $72,000
• Free money (interest): over $227,000
• Total: about $300,000

If that 7-year money was in a bank account instead, it would most likely earn under $100, because most bank accounts we see immigrants using earn little to no interest.

Notice what happens when we add just three years, from 7 to 10: the free money more than doubles. And from 10 to 30 years, the vast majority of the money is interest. The only thing we changed was time.

Why time matters so much: compound interest

The reason that more than doubled is compound interest. In the stock market, your money grows exponentially over time. You put in $200 a month. That money earns interest, then that interest earns interest, and that interest earns interest. You also get dividends, which is essentially the companies paying you, usually every quarter, for investing with them.

So when you delay investing, or you avoid it, or you never get around to it, or you say people like me don’t get to do that, you’re missing out on this free money.

You can do this

The first time we saw that calculator, it blew our minds. We haven’t stopped investing since.

This is what’s possible for you – for immigrants, children of immigrants, and family members of immigrants. Investing a small amount every month over 10, 20, 30 years can put you in a position to grow serious wealth, pass money down to your family, and be secure in retirement.