Five reasons to start investing early
Imagine if you had started preparing for exams early? If you had started reading early, learning early, started exercising early… you’d be at a much better place, wouldn’t you? So is the case with saving and investing your money. The sooner you start, the better off you’ll be down the road.
Though many people feel one should wait until they are older (in their 30s and 40s) to start investing, it’s not the best course of action. Here are five reasons why:
1. Take advantage of the magic of compounding
Albert Einstein, one of the most brilliant minds, knew the immense power of compounding. He had remarked: “Compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it.”
One of the biggest reasons to start investing early is the power of compounding. Compounding happens when you earn interest on your interest, which also includes your original investment. This has a snowball effect.
You’ll be shocked at how much money you will manage to save, even if you start investing a small amount each month.
Consider you started investing Rs 2,000 each month at the age of 25. If your investment earned 12 per cent annually, your investment of Rs 6 lakh would grow to Rs 37.95 lakh by the time you are 50.
If you keep investing the same amount for another ten years, your total investment of Rs 8.4 lakh will become a massive Rs 1.3 crore. You read that right, we haven’t added a zero by mistake.
That’s compounding working its miracle.
As you can see, the more time your money has to grow, the faster it will compound – and the more money you will ultimately have. By investing early, you can increase returns in the long run.
2. Even small amount of money can work wonders
Don’t worry if you’re just getting started and don’t have enough money to invest. You can start an SIP for as little as Rs 500 every month.
Investing a small amount slowly but steadily can lead to a bigger corpus over time, as you saw in the example provided in the first point.
You can always increase your contributions when your income increases over time.
The secret is to begin investing early and to do it diligently. However, if you continue to wait until you have amassed a substantial sum before investing, it might already be too late.
3. You’ll have more time to make up for any mistakes
One benefit of getting started early is that you will have plenty of time to correct any beginner’s mistakes. It can give you more time to educate yourself, experiment and find strategies that work best for you.
Assume something bad happens that causes you to lose money. You still have time to recover. You will learn to handle the risks of investing better.
However, if you wait until later in life to begin, you will need to be more cautious, and your ability to take risks will likely be more constrained due to increased life responsibilities.
Your twenties are the time to experiment and learn because time is on your side.
4. You can meet your financial goals sooner
When you start investing early, you reach your financial goals early, which can also include early retirement.
Early investing can assist you in achieving your goals quickly, whether you want to buy a home or a car.
Additionally, you’ll have more time to enjoy your money. If you wait until your thirties or forties to begin investing, you’ll be less likely to have enough time to let your money grow.
However, by starting young, you might not want to keep all your money in investments after retirement. Instead, you can use it to enjoy your golden years.
5. You’ll be better prepared for adversities
At some point, your finances may become unstable, but by investing early you’ll be prepared to face such low phases. Early investing can help you overcome such tough periods as you would have enough money to tackle tough phases.
As former US president John F Kennedy once said: “The time to repair the roof is when the sun is shining.” The same is true in the case of investing. So, start early and hit the road of financial freedom.