The best time to plant a tree was twenty years ago, says an old Chinese proverb. The same can be said for investing. But since a time machine has not yet been invented, the next best thing is to start investing today. Here’s why it is absolutely necessary to begin your investments ASAP.
- Your money will grow more
One of the most important ingredients for good financial returns is time. When you start investing from an early age, you get a good financial head start. Even a time-gap of ten years can make all the difference. Here is an example to illustrate the difference.
Thirty-year-old Meera invests Rs 10,000 per month in a mutual fund through a Systematic Investment Plan (SIP). The fund offers an annual return of 13%. By the time she retires at the age of 60, Meeracan create a lump sum of Rs 4.4 crore.
Forty-year-old Mukesh also invests Rs 10,000 per month in the same fund. But when he retires at the age of 60, he earns a lump sum of Rs 1.1 crore. This is much smaller than what Meera earns. Ten years might not seem like a lot of time. But when it comes to investments, it makes a huge difference.
- You will have better spending habits
Investing early means you pick up good personal finance habits right from the start. This helps you in your financial planning and allows you to focus on your monthly budget and minimize expenses wherever required.
The fundamental goal here is to earn more money by saving more money. When you cultivate the habit of saving and investing, you automatically curb unnecessary spending habits. This provides you with a big payoff in the long run when you have greater capital at your disposal.
- You have the ability to take more risks
Investing in equity offers you greater potential to earn higher returns. However, stock markets can be quite volatile. In case you invest in a particular security and it crashes, you need the time to recover your earnings. This is possible if you invest early. But in case you start investing late in your professional career, you may have to be more cautious to minimize losses. As a result, you would not be able to fulfil the maximum potential of your investments.
- You can start small
Many investors assume that you can only get high returns if you invest a large sum of money. This is not necessarily correct. You can start investing in mutual funds through Systematic Investment Plans (SIP) with as little as just Rs 500 or Rs 1,000. This may not seem like a lot of money but over a period of time, these monthly investments can snowball into a large corpus. It doesn’t matter how much you invest, the important thing is to invest regularly and consistently.
When you know that you have set aside a fund for your future requirements, you can have greater peace of mind. This can help you plan for any financial requirements such as building a home or funding your retirement. You can also tackle unexpected emergencies. So make sure that ‘investments’ features prominently on your to-do list for today. And yeah, planting a tree is a good idea too.