31 May

In our early or mid-20s, when we start our first jobs, the salary amount that we receive is not very high. Now, from that, we have to manage all our monthly expenses like rent, food, commute, etc. And with the new-found freedom of having money in hand, the urge to spend is more. And, at this life stage, saving and investing are the last things in our minds.

However, there are several perks of starting investments early. And in this blog, we will talk all about that.

Here are the 5 reasons why you should start your investments early

Number 1: Since investment tenure is longer, the investment amount can be small

We all have dreams, like buying our favorite car or having a destination wedding, which we want to achieve. For example, say you want to get married 7 years down the line, and for this, you need to save Rs 20 lakh. You decide to invest in equity mutual funds, and through mutual funds do not provide any guaranteed returns, the long-term returns for them are in the 12% range. Now for saving Rs 20 lakh in 7 years, you would have to invest Rs 15,000 every month. And the total investment amount would be Rs 12 lakh. 

Meanwhile, if you start investing in the goal 2 years later, then you would have to invest Rs 25,000 per month to achieve that goal in a timely manner. Moreover, the total investments would be Rs 15 lakh.

Number 2: Starting investment early improves your spending habit: 

If you make the habit of saving/investing early on it will automatically improve your spending habit. When you want to save a fixed amount from your fixed salary, you will have to put a restriction on your spending by creating a monthly budget for yourself. And having a budget is the best way to improve your spending habits as it helps you track your monthly expenditure on food, utilities, rent, leisurely activities, etc. And with years of practice, this simple task becomes a habit. 

Now, to make saving a habit, put away the amount you want to save every month first. And then create a monthly budget with the amount that you have left.

Number 3: You enjoy the benefit of compounding. 

The earlier you start investing, the more you enjoy the benefit of compounding as you stay invested longer. 

Number 4: You can accumulate a larger corpus for staying invested longer

Since you can have the benefit of compounding longer for staying invested longer, the corpus accumulated over the years will also be much higher. Hence, it’s always beneficial to start early and stay invested for longer to accumulate a large corpus without feeling the pinch in your pocket or compromising on your daily standard of life. 

Number 5: You have a higher risk-taking ability

When you are young, you have the chance to take more risks than at a later stage in life. At this age, your financial responsibilities are less, so you don’t have to think too much before investing your money in a risky product. And even if you go wrong with your investments, you would have ample time to correct your mistakes and recover from it in the future.

And even though equities are riskier than fixed income products, they have the potential to give you higher returns in the long run helping you to create a larger corpus for a smaller investment amount.

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