IMPORTANCE OF STARTING EARLY INVESTING
When you are young, you often do not have enough money to splurge on yourselves. Now that you finally have the means the buy that dress or gadget you have being eyeing on for a long time, your money disappears sooner than you realise. At this stage, you might feel that investing is not the hour of the need and can be postponed by a few years. By the time you may realise the importance of investing, you may lose the benefit of time by your side that you had when you were young. Also, when you are young you do not have any added responsibilities of raising a family.
When you begin to invest early from a young age, you take the full benefits of the power of compounding. Compounding helps to multiply returns at an exponential rate. The longer you stay invested, the higher are the returns from compounding. Let’s comprehend the power of compounding with the help of an example.
Kamal and Ravi are brothers. Ravi is his prime years of earning at 30 years of age and has recently started investing in different investment options. His younger brother, Kamal, who is 25 recently started earning and realised the importance of investing from a young age. Both the brothers begin to invest at the same time in the same scheme via SIP (systematic investment plan) that provides average returns at 12% per annum. Though Ravi is able to invest Rs 5,000 per month, Kamal can only afford to invest Rs 3,500 at the moment. Both the brothers stay invested in this scheme till the age of 60. On maturity, using SIP calculator, we can deduce that Kamal would have accumulated around Rs 2.1 crore. On the contrary, Ravi would have accumulated just Rs 1.6 crores. Even though Ravi invested Rs 1500 extra per month than Kamal, he ended up accumulating lesser amount than Kamal. Why is that? It is because of the power of compounding.
This simple example demonstrates the importance of investing at a young age, even if you do not have adequate funds to invest at the moment. You can always choose to increase your SIP investment amount later in life as your income or salary increases. Investing early from a young stage makes you a step closer to your dreams and goals and helps you acquire the much-sought financial independence.
If you are new to the investing world, mutual funds are a good place to start with. With different types of mutual funds in India, an investor is spoilt with choices. You can choose the one that best aligns with your investment portfolio, risk profile, financial goals, and investment duration. You can also seek the services of a financial expert or advisor if you need help with your mutual fund investments. So, what are you waiting for? Do not wait for the next big raise or income. Invest today with whatever amount you have. SIP allows you to invest in mutual funds with an amount as low as Rs 100 per month. So, go. Invest. Happy investing!