Andrew Hallam
10.12.2019
Are You Ever Too Old To Start Investing?
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Lindsay’s eyes narrowed. I was delivering a presentation on investing, and she had a burning question. It was something many people think…but few have the courage to ask.
"I can see the benefit of compound interest," she said. "I can also see why investing in a portfolio of index funds makes so much sense. But is it too late for me to start investing? I’m already fifty-eight."
I’ve met plenty of people like Lindsay. In fact, my parents were a lot like her. They worked hard all their lives. They raised their children. But after the cost of living and their regular mortgage payments, they didn’t have money to invest.
By the time they hit their mid-50s, however, they lived in an empty nest. That was when they asked if they were too late to start investing. Like Lindsay, they worried what would happen if the markets fell. After all, they wanted to retire within ten years, and they didn’t want to lose their hard-earned money.
You might relate. After all, you probably remember the market crash of 2000-2002. U.S. stocks dropped about 40 percent. Stocks crashed again in 2008: U.S. stocks cratered 37 percent and global stocks fell even further. But I’m going to make a bold prediction. If you don’t have any investments today, and if you start to invest regular monthly sums, you will make a profit over the next 10 years. No, I don’t have a working crystal ball. But history paints a profitable picture, even though the canvas has lumps.
There are just two rules: The portfolio should include broad diversification of stocks and bonds. I suggest about 60 percent in stocks and 40 percent in bonds. It should also charge low fees.
Using portfoliovisualizer.com, I back-tested a portfolio of 60 percent U.S. stocks and 40 percent bonds. I examined the 38 rolling 10-year periods between 1972 and 2019. In other words, I looked at the ten years between 1972-1981, 1973-1982, 1974-1983, and so on, until 2009-2018. If an investor began with nothing, and if they added a consistent monthly sum, they would have made a profit during every one those 38, ten-year periods.
I also checked the 48, rolling 5-year periods between 1972 and 2019. Shorter time durations bring higher risks. But investors would have earned profits during 46 of the 48 periods. One exception was 1998- 2002. Investors would have lost 1.14 percent per year. But if they added money for just one more year, they would have earned a compound annual return of 4.89 percent over the six-year period from 1998-2002.
The only other rolling 5-year period when investors wouldn’t have made a profit was between 2004 and 2008. Investors would have lost 1.56 percent per year. But once again, if they added regular sums for just one more year, they would have seen gains. Over the six-year period from 2004-2009, investors would have earned a compound annual return of 3.91 percent.
I also checked rolling 10-year periods for portfolios comprising 60 percent global stocks and 40 percent global bonds. The same premise applied. In all 16 rolling periods beginning in 1994 (the earliest date from which I could gather the data) investors would have made money.
Stocks don’t always rise. They have good days and bad days, good years and bad years. But if we add regular sums to a balanced portfolio every month, we’ll likely never be too old to see a decent profit.
Rolling Ten-Year Returns For A Balanced Index Fund
Assuming The Investor Started With Nothing And Adds $500 A Month
| Rolling 10-Year Periods | Total Added | Money Weighted | Portfolio End Value |
|---|---|---|---|
| 1972-1981 | $60,000 | 9.02% | $94,943 |
| 1973-1982 | $60,000 | 12.13% | $111,722 |
| 1974-1983 | $60,000 | 13.35% | $119,140 |
| 1975-1984 | $60,000 | 12.57% | $114,366 |
| 1976-1985 | $60,000 | 15.04% | $130,300 |
| 1977-1986 | $60,000 | 15.57% | $133,942 |
| 1978-1987 | $60,000 | 13.67% | $121,140 |
| 1979-1988 | $60,000 | 13.42% | $119,611 |
| 1980-1989 | $60,000 | 14.73% | $128,180 |
| 1981-1990 | $60,000 | 12.31% | $112,768 |
| 1982-1991 | $60,000 | 14.08% | $123,815 |
| 1983-1992 | $60,000 | 12.77% | $115,580 |
| 1984-1993 | $60,000 | 12.45% | $113,606 |
| 1985-1994 | $60,000 | 9.56% | $97,655 |
| 1986-1995 | $60,000 | 12.22% | $112,269 |
| 1987-1996 | $60,000 | 12.64% | $114,741 |
| 1988-1997 | $60,000 | 14.44% | $126,211 |
| 1989-1998 | $60,000 | 15.24% | $131,673 |
| 1990-1999 | $60,000 | 15.29% | $132,035 |
| 1991-2000 | $60,000 | 12.71% | $115,205 |
| 1992-2001 | $60,000 | 9.83% | $99,069 |
| 1993-2002 | $60,000 | 6.48% | $83,265 |
| 1994-2003 | $60,000 | 8.14% | $90,732 |
| 1995-2004 | $60,000 | 7.65% | $88,457 |
| 1996-2005 | $60,000 | 6.56% | $83,620 |
| 1997-2006 | $60,000 | 6.81% | $84,708 |
| 1998-2007 | $60,000 | 6.74% | $84,370 |
| 1999-2008 | $60,000 | 2.11% | $66,672 |
| 2000-2009 | $60,000 | 4.54% | $75,395 |
| 2001-2010 | $60,000 | 6.28% | $82,423 |
| 2002-2011 | $60,000 | 6.14% | $81,839 |
| 2003-2012 | $60,000 | 6.84% | $84,839 |
| 2004-2013 | $60,000 | 8.76% | $93,672 |
| 2005-2014 | $60,000 | 9.14% | $95,567 |
| 2006-2015 | $60,000 | 8.0% | $90,074 |
| 2007-2016 | $60,000 | 8.26% | $91,293 |
| 2008-2017 | $60,000 | 9.48% | $97,280 |
| 2009-2018 | $60,000 | 7.44% | $87,473 |
Source: portfoliovisualizer.com, 60% U.S. Stocks, 40% U.S. Bonds
Note: International Investors would have also earned profits over rolling ten-year periods. I back-tested results for 16, rolling 10-year periods starting 1994 (the earliest date from which portfoliovisualizer provides data). I used a portfolio comprising 60 percent global stocks, 40% global bonds.
Rolling Ten-Year Returns For 60% Global Stocks, 40% Global Bonds
Assuming The Investor Started With Nothing And Adds $500 A Month
| Rolling 10-Year Periods | Total Added | Money Weighted Compound Annual Return | Portfolio End Value |
|---|---|---|---|
| 1994-2003 | $60,000 | 7.23% | $86,542 |
| 1995-2004 | $60,000 | 8.20% | $91,021 |
| 1996-2005 | $60,000 | 7.32% | $86,944 |
| 1997-2006 | $60,000 | 8.54% | $92,632 |
| 1998-2007 | $60,000 | 8.97% | $94,260 |
| 1999-2008 | $60,000 | 2.24% | $67,114 |
| 2000-2009 | $60,000 | 6.16% | $81,889 |
| 2001-2010 | $60,000 | 7.70% | $88,667 |
| 2002-2011 | $60,000 | 6.38% | $82,856 |
| 2003-2012 | $60,000 | 7.17% | $86,260 |
| 2004-2013 | $60,000 | 7.92% | $89,669 |
| 2005-2014 | $60,000 | 7.31% | $86,899 |
| 2006-2015 | $60,000 | 5.63% | $79,716 |
| 2007-2016 | $60,000 | 5.97% | $81,093 |
| 2008-2017 | $60,000 | 8.25% | $91,242 |
| 2009-2018 | $60,000 | 5.52% | $79,257 |
Source: Portfoliovisualizer.com
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas
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Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.