Article

Why should you start investing early in life?

01 Jun 2017 Nutan Gupta

New Page 1

We have always come across the advice of "the sooner the better".However,living in a rapidly changing environment, hardly do we pay attention to this. It happens quite often that we are so busy in paying household bills, splurging on new technologies and paying loans that there is hardly any time left to pay attention to investments. Though, it is a proven fact that even the smallest investment can have a long lasting impact on your financial status.

Better risk appetite

One of the biggest advantages of starting investment early is that you can take as many risks you like. In investing, volatile ventures aim to give the maximum returns too. Hence, you can invest in it and hope that the leap of faith would pay off. Since you started early, even if things don’t go as planned, you still manage to get enough time to recover and start afresh. Something which might not be possible if you start investing later in life.

Benefits of compound interest

Compound interest works on the basis of earning you interest on your interest. So, if you constantly reinvest your earnings, you might end up earning more due to the power of compounding. Let’s understand this with an example:

Amit

Abhijeet

Amount invested

Rs. 1000

Rs. 1000

Age at start of investment

25 years

30 years

Age at end of investment

60 years

60 years

Tenure of investment

35 years

30 years

Rate of interest

12%

12%

Corpus at the end of investment

Rs. 64 lakh

Rs. 35 lakh

Amit and Abhijeet both invested the same amount with the same interest rate but Amit ended up having a larger corpus. This was because he started 5 years early and the power of compounding worked for a longer time in his favor.

Improved spending

Investing early helps you develop a habit of saving. This would also ensure that you don’t spend recklessly on the things you don’t need. You would spend more responsibly since your goal is to earn money by saving it. The more control you exert on savings today, the more lavishly you can spend tomorrow.

Freedom to learn by doing

Since you start early, you get the benefit to study and learn to invest from both the ups and downs of the market. You can experiment and learn from your investment strategies and improve on them as time goes by. You may gradually start reducing mistakes and become more absorbed in understanding the nuances of the market. This can help you achieve great success ahead.

Investing early is not just for retirement. You can do it for various other goals as well. You can start early to save for your first house or your vacation to Bangkok or to buy the new sports bike that you fancied. Contributing to investments will give you a disciplined outlook towards your earnings. It would help you avoid those irresponsible spending and ensure you have a secure fallback option in times of need.

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Beginner's Corner

Why should you start investing early in life?

01 Jun 2017 Nutan Gupta

New Page 1

We have always come across the advice of "the sooner the better".However,living in a rapidly changing environment, hardly do we pay attention to this. It happens quite often that we are so busy in paying household bills, splurging on new technologies and paying loans that there is hardly any time left to pay attention to investments. Though, it is a proven fact that even the smallest investment can have a long lasting impact on your financial status.

Better risk appetite

One of the biggest advantages of starting investment early is that you can take as many risks you like. In investing, volatile ventures aim to give the maximum returns too. Hence, you can invest in it and hope that the leap of faith would pay off. Since you started early, even if things don’t go as planned, you still manage to get enough time to recover and start afresh. Something which might not be possible if you start investing later in life.

Benefits of compound interest

Compound interest works on the basis of earning you interest on your interest. So, if you constantly reinvest your earnings, you might end up earning more due to the power of compounding. Let’s understand this with an example:

Amit

Abhijeet

Amount invested

Rs. 1000

Rs. 1000

Age at start of investment

25 years

30 years

Age at end of investment

60 years

60 years

Tenure of investment

35 years

30 years

Rate of interest

12%

12%

Corpus at the end of investment

Rs. 64 lakh

Rs. 35 lakh

Amit and Abhijeet both invested the same amount with the same interest rate but Amit ended up having a larger corpus. This was because he started 5 years early and the power of compounding worked for a longer time in his favor.

Improved spending

Investing early helps you develop a habit of saving. This would also ensure that you don’t spend recklessly on the things you don’t need. You would spend more responsibly since your goal is to earn money by saving it. The more control you exert on savings today, the more lavishly you can spend tomorrow.

Freedom to learn by doing

Since you start early, you get the benefit to study and learn to invest from both the ups and downs of the market. You can experiment and learn from your investment strategies and improve on them as time goes by. You may gradually start reducing mistakes and become more absorbed in understanding the nuances of the market. This can help you achieve great success ahead.

Investing early is not just for retirement. You can do it for various other goals as well. You can start early to save for your first house or your vacation to Bangkok or to buy the new sports bike that you fancied. Contributing to investments will give you a disciplined outlook towards your earnings. It would help you avoid those irresponsible spending and ensure you have a secure fallback option in times of need.