Your Investment Tree takes time to Grow. Plant the Seed and Start Now!
- Simon Wong
- 2 days ago
- 5 min read
There is a famous Chinese proverb that perfectly captures this:
'The best time to plant a tree was 20 years ago. The second best time is NOW.'
Think about a massive, sprawling oak tree in a park. You enjoy sitting in its cool shade on a hot summer day only because someone else, decades earlier, took the time to dig a hole and drop in an acorn. You are benefiting from someone else's foresight.
When it comes to your financial life, the metaphor holds perfectly true:
The Shade is your future comfort, your retirement, and your quality of life when you stop working.
The Tree is the wealth that provides that shade.
The Seed is your very first investment.
The Water is your discipline to keep investing consistently, rain or shine, market boom or market bust.
The High Cost of Waiting
The biggest trap in personal finance is the belief that you should wait until you are 'ready'. Most people think, 'I'll start investing when I have a "real" job', or 'I'll start when I earn more money', or 'I'll start after the wedding'. Social norms tell us it’s okay to spend everything we earn while we are young and only buckle down to save when we are 'stable' in our 30s or 40s. Logically, this makes zero sense.
Money is replaceable; you can always earn more. Time is the only resource you cannot buy back.
Let’s look at the math for three people—Alex, Sam, and Taylor. They all want a nest egg of £1,000,000 by age 60, and they all manage a reasonable 7% average annual return via a low cost international world market index fund.
Investor | Starting Age | Years to Grow | Monthly Contribution | Total Out-of-Pocket | Compound Growth (Profit) |
Taylor | 18 | 42 | £310 | £156,240 | £843,760 |
Alex | 25 | 35 | £550 | £231,000 | £769,000 |
Sam | 35 | 25 | £1,300 | £390,000 | £610,000 |
Look at the difference between Taylor and Sam. Taylor starts at 18, perhaps just putting away part of a part-time job income. It’s a manageable amount.
Sam waits until 35. Maybe Sam spent their 20s travelling or paying off student debt. Now, to get the exact same result as Taylor, Sam must find an extra £1,000 every single month.
By waiting 17 years, Sam has to pay £233,760 more out of their own pocket than Taylor did to build the same size tree. That is the 'opportunity cost' of waiting. It is a massive tax levied on your future self by your present self.
The Doctor's Dilemma: Income vs. Time
You might argue, 'But when I'm older, I'll earn way more money, so catching up will be easy!' This is a dangerous illusion. Let's take a real-world scenario using two doctors at different stages of their careers.
We'll assume they both want to retire nicely at age 65 with roughly £1.5 million in the bank, assuming that same 7% growth.
Doctor A is an FY2 (Foundation Year 2). She is 26 years old. She works insane hours, have student debt, and their salary isn't huge yet.
It’s a struggle, but her discipline on herself to invest just £600 a month. She does this consistently for her whole career. By age 65, she will have over £1.5 million, NEVER having to increase the monthly investment amount!
Doctor B is a Senior Registrar. He is 38 years old. He finally have a 'high' salary and feel financially secure. He decides it's time to start building that £1.5 million retirement pot by age 65. Because Doctor B lacks the time ingredient, his high income has to do all the heavy lifting, by investing £2000 per month!
To reach the same goal as the FY2, the Senior Registrar needs to invest roughly £1,750 a month. The FY2 used time to grow their wealth. The Senior Registrar has to use brute financial force. Who feels more squeezed every month?
The high earner who has to find nearly £2,000 a month just to catch up, or the lower earner who built a £600 habit early on?
The Danger of Chasing Returns (if the same amount is invested)
If you delay, you cannot just 'work harder' to catch up. You are often forced to take dangerous risks by chasing higher riskier investment returns. If the 38-year-old Senior Registrar only invests the same £600 a month as the 26-year-old FY2, he won't even come close to the goal.
If the older person cannot afford higher monthly contributions, the older investor needs the market to perform miracles.
Instead of a steady 7% return which is all the younger junior doctor needs, the old registrar's investment style would need to achieve a consistent 15% or 16% return year-after-year just to break even with the early starter!
Getting a 15% annual return/growth consistently is nearly impossible. Even the world's best hedge fund managers struggle to do that. Warren Buffet, one of the world's most successful investors is one of the only few who could average that throughout a career and there are only a handful of people like him in the world.
Trying to chase those returns usually leads to buying risky assets that crash, stock trading with unrealistic expectations and little to no downside protection, chopping your wealth tree down entirely.
Nearly all everyday people chasing unrealistic investment returns, end up suffering massive drawbacks that further delay their ultimate financial independence.
Act Now, Start Today
Start Digging TODAY If you are reading this at 30, 40, or 50 and you haven't started, you might feel regret. I felt the same way when I looked at my empty bank account in my late 20s, wishing I'd started at 18. But dwelling on the past won't grow wealth.
Remember the proverb: the second best time is now.
Stop waiting for a 'better' time. It will never feel like the perfect time to lock money away.
Automate your 'water'. Don't rely on willpower. Set up an automatic bank transfer on payday. You can't forget to water the plant if the sprinklers are automatic.
Start small. A tiny seed is infinitely better than no seed. All big trees were once small seeds and seedlings.
Would you rather be the person sweating in the Sun 20 years from now, or the person sitting in the shade?
The dirt is ready. Plant your seed today.
Disclaimer
All content on this blog is provided for general financial education and entertainment purposes only and does not constitute financial, investment, tax, legal or any other professional advice. Nothing on this site takes into account your individual objectives, financial situation or needs, and you should not rely on it to make any financial decision.
You remain solely responsible for your own decisions and must do your own research, due diligence and independent learning before acting on any information mentioned or implied here. Examples, case studies and any numbers used are purely illustrative and cannot be guaranteed or replicated in your circumstances.
Investing and financial planning carry risks, and the value of any investment can go down as well as up. Before making any financial, investment or tax decisions, you should seek personalized advice from a suitably qualified, regulated professional adviser.
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