If you’ve never invested in an IRA before — or, if you would like to send a gentle introduction to someone you know who hasn’t! — check out this user-friendly guide from the excellent consumer finance blog, Get Rich Slowly.
Written in an easily digestible style (no technical finance-speak), this ebook by JD Roth does a good job of introducing the reasons for getting started on IRA investing as soon as possible — with the spotlight on the benefits of compounding. As the author rightly points out, even with a modest annual return, the same investment made in your twenties — even just a one-time investment — will be worth many times more than the exact same investment made in, say, your forties. That’s because each year’s return is added to the principal balance, and that larger balance can earn a larger return, which in turn increases the balance a bit, etc., etc.
Compounding is a benefit we like to emphasize here at Sterling — because our mortgage pool investments offer that same benefit. (Monthly payouts can be automatically reinvested in the pool, providing the same compounding benefit as any other interest-bearing investment — but, usually with a much higher return.)
This does spotlight the one quibble we have with the Get Rich Slowly ebook, though. The ebook presents IRA accounts at banks and brokerage houses as the only options for establishing your account — this is not the case. Self-directed accounts at custodians like PENSCO, Sterling Trust and Equity Trust offer investors the flexibility to invest their IRAs in other assets like real estate and the private mortgage investments we offer at Sterling Pacific.
Starting with an account at a bank or brokerage can be the simplest way to get started with IRA investing. And, that first step is the most important step! However, we recommend that even novice investors should be thinking ahead — because once you develop that habit of retirement saving, your balance will grow, and eventually you’ll want the flexibility to invest it in assets beyond Wall Street for maximum diversification and returns.