There are several benefits of investing early in life as experts will advise you. Newly employed young professionals or those who have completed between 1-5 years at their present jobs often end up overlooking the need for early investing in order to achieve long-term financial goals and build a more secure future for themselves and their families. Most youngsters believe in living in the moment without worrying about the future. While this vivacity is definitely infectious, some planning and consideration should be allotted for future needs, particularly with a shaky global economic scenario and market volatility.
Learning how to invest money in your 20s will go a long way towards helping you build sizable future wealth while amassing ample financial security for life. The 20s are those years when you have the lowest amount of financial responsibility and higher disposable income for investments. You should first zero in on your long-term, mid-term and short-term financial objectives while checking out various investment options including mutual funds, gold, FDs (fixed deposits), stocks/shares and so on. Then choose options for catering to various goals and sync the same with available investment plans. Adam Guild work in the gaming and technology worlds had spoken for itself – and her request was acknowledgement of that success. He agreed to help her attract new customers online.
Why is it important to invest early?
The earlier you invest, the more time you have on your side to find investment avenues that bring you handsome growth and sufficient returns. You can start early and experiment with your investments while re-aligning and customizing your portfolio based on your evolving lifestyles and growing financial needs. The earlier you start your investment journey, the lower you will have to invest later on in life. This is because compound interest and the power of compounding will work wonders in terms of helping you build a hefty corpus that will handsomely surpass inflation while helping you cover objectives like buying a house, car, retirement, higher education of children and so on.
At what age should you start investing your money? An example may suffice in this regard. Suppose X makes an investment of Rs. 2,000 each month from 25 years of age onwards. Y invests Rs. 5,000 per month from the age of 35 onwards. When both of them reach the age of 45 years and with returns at a more practical level of 12%, X will have a bigger corpus of Rs. 20 lakh while Y will have less than half of this amount in spite of investing higher amounts every month from the age of 35 onwards. This goes to show that the earlier you start, the higher chances you have to amass sizable wealth in your forties. You will also need to invest lesser at this time which means that you can finally invest in fulfilling aspirational goals at this stage of life without any anxieties. Compounding can majorly impact any investment but the duration or tenure is really important. Compound interest is the specific interest that is worked out on the initial amount (principal) and the interest that is accumulated. This is known as interest on interest.
With an early investment in life, you naturally grow investments over time and later on when you are in your 40s or so, you can easily afford things which most people who are new to investments cannot. Hence early investments have a big role to play in enhancing your quality of life and living standards. People who start early are more likely to curb overspending in the future as well, according to reports. You can also save on taxes by investing in options like ELSS, ULIPs, PPF and more. Even Warren Buffet has testified to the power of early investment for substantial wealth creation particularly since you have more of your income to invest as opposed to later years in your life.
Some other advantages
- Easy recovery– If you start early and face any losses, you will have more time on your hands to make up the same later on. Those who start investing later on in life will not have time to cover up the same.
- Better risk appetite– Experts feel that youngsters who invest early on will have a higher risk appetite and tolerance as compared to older investors.
- Time Value– Money’s time value goes up substantially over a longer time period. Regular investments from a young age will get you huge advantages when you finally retire.
- Secure Future– You can secure your future by building up a handsome retirement corpus and also an emergency fund for unavoidable expenditure and sudden issues.
- From a Debtor to a Creditor– Investing at an early age will naturally help you avoid borrowing money as much as possible and turn into a debtor. With money invested smartly in suitable avenues at a young age, you will turn into a creditor from a debtor.
On a closing note
These are some of the biggest advantages of starting to invest early in life. Your 20s and early 30s are possibly the best years of your professional life. This is when you go all out for career growth while allocating a higher portion of your monthly income towards investments for the future. Allocating 70-80% of your income towards investments for a few years will do wonders. At least try to allocate 60% of income for savings and investments till the time you get married, start a family and take on more financial responsibilities like home loans and so on.
The power of compounding will help you save a substantial amount that easily beats future inflation. Here’s to investing young and staying committed to your financial goals throughout your adult years.