The road to financial independence and growing wealth is not paved with luck or perfect timing, but with time itself. Use it wisely, writes Matt Hardwick from Octagon Asset Management.

At first glance, the logic behind timing the market seems compelling. Buy when prices are low, sell when they’re high, and you’ll enjoy superior returns with less risk. But the truth is way more practical and, helpfully, easier to follow.

The majority of seasoned investment professionals struggle to accurately predict market movements with any consistency. The difference between a good year and a great year – or a bad one and a catastrophic one – can hinge on only a handful of trading days.

Miss just a few of those best-performing days, and the impact on your growing wealth can be dramatic.

Consider this example extracted from J. P. Morgan data; over the two decades from 2003 to 2023 the S&P 500 returned 9.52 per cent annually. In those 20 years there were approximately 5,000 trading days.
However, if an investor missed just the 10 best trading days in that 20-year period, representing around 0.2 per cent of the total number of trading days, their average annual return fell to 5.33 per cent. Missing these 10 days and the next 10 days (so the best 20 days in 20 years) reduced returns to barely above inflation.

The point is clear, the cost of being out of the market, even temporarily, can be devastating. The answer, become a long-term investor.

Time is everyone’s superpower

The real superpower in growing wealth, which is available to every investor, is time. Combined with the power of compounding, time becomes a wealth-building engine that far exceeds anything that most short-term strategies can offer. This is especially true for younger investors starting out on life’s journey and beginning to build meaningful wealth. The choice to invest for the long term can shape their financial future in profound ways.

Compounding works by allowing investment returns to generate their own returns. It’s growth on growth. Warren Buffett, arguably the world greatest investor, famously professed that his
life has been a product of compound interest. He also noted, “time is your friend; impulse is your enemy. Take advantage of compound interest and
don’t be captivated by the siren song of the market.”

And here’s where the superpower kicks in: the earlier you start the more powerful compounding becomes. A 30-year-old investing $500 per month until age 60, assuming an average return of 8 per cent, could end up with close to $750,000 on their 60th birthday. But someone starting at 40 would need to contribute more than twice as much – around $1,200 per month – to reach the same goal by the same age. Time isn’t just a convenience. It’s a multiplier. It’s your freely available superpower.

Time helps reduce the noise

Beyond the maths, there’s also the emotional benefit of time in the market. Financial headlines can be noisy, full of dire warnings and euphoric predictions. Market volatility can shake confidence, especially for newer investors. But with a long-term mindset, that short-term volatility becomes less intimidating. Market dips are no longer existential threats – they’re buying opportunities. Over time, the jagged lines on an equity price chart smooth out into a steady upward trend. Historically, markets have recovered from wars, recessions, pandemics and political upheaval. The key is staying invested through the rough patches and coming out the other side.
This approach isn’t just about returns. It’s about peace of mind. Trying to time the market invites stress, second-guessing, and emotional decision-making. Long-term investing encourages discipline and consistency. It transforms investing from a game of chance into a habit of growth.

Where to start, and when?

If you’re ready to begin growing wealth , but unsure where to begin, investment funds are a great place to start – especially for long-term investors.

These funds provide built-in diversification within a specific asset class or geographic region, helping spread your investment risk from the outset. For example, a New Zealand fixed interest fund, a listed property fund, or a global equity fund are all single asset class funds offered by Octagon Asset Management. Each fund is clearly named to reflect the asset class or region it invests in, making it easy for investors to understand what they’re buying.

Investment funds have several advantages over building your own portfolio or investing directly. They are professionally managed by experienced portfolio managers who make investment decisions on your behalf.

This saves you time and gives you access to institutional-level research and expertise. These funds also tend to be easy to access, with low minimum investment requirements and the flexibility to make regular contributions.

Importantly, unlike KiwiSaver schemes, most investment funds can be accessed before retirement, offering greater flexibility if your circumstances change.

It’s worth noting that all KiwiSaver schemes use investment funds to some degree –and for good reason. KiwiSaver typically uses multi-asset class funds, which spread your investment across a mix of shares, bonds, property and cash. These funds come with a range of risk profiles – such as conservative, balanced, growth, and aggressive growth – giving you the ability to choose a strategy that suits your goals and comfort with risk.

The best time to start is right now

Buffett is also quoted as saying, “The stock market is a device for transferring money from the impatient to the patient.”
In your early years patience is unlikely to be your most obvious character trait. The wealthiest investors aren’t the ones who pick the perfect stock or predict the next crash – they’re the ones who started early, stayed committed, and let compounding work its magic.

Buffett, who started investing at 13 years old, acquired 99 per cent of his net worth after he turned 50 years old and 97 per cent of his net worth after he turned 65.

The call to action is simple but powerful: start now, diversify and stay committed. Whether it’s $50 a week or $500 a month, begin investing regularly. Don’t wait for the market to calm down, or for the next “perfect” entry point. Those likely never come. But time – and the power of compounding – will always be on your side.

This article has been prepared in good faith based on information obtained from sources believed to be reliable and accurate. This article does not contain financial advice. Octagon Asset Management is the investment manager for Octagon Investment Funds and the Summer KiwiSaver scheme.