It is already a well-known fact that investment helps you grow your wealth. While you can start investing at any age, you should start early to get the most out of your investments and build a larger corpus.
Warren Buffet, one of the most popular and prominent investors, once stated that he started investing at the age of 11. While that may not be possible for an average person, the billionaire’s message was clear, start investing as early as you can.
So, why do countless financially successful people and investment advisors advocate early investment and why Indians should start investing at an early stage?
Beat the inflation
Inflation in India has been rising steadily for the past 30 years. It is safe to assume that it will keep growing in years to come. Inflation can drastically reduce the value of your savings as the cost of everyday items increases.
One of the best ways to beat inflation is to invest as much as possible since your early days and build an adequate retirement corpus by the time you retire. This will help you meet the expenses without any hassles, even as the cost of living rises as you grow old and do not have a stable income.
Power of Compounding
When you start investing early, you can accumulate a significant amount over the long term. Furthermore, your investments get the benefit of compounding over time.
Consider you have invested ₹ 10 lakhs in a scheme that promises annual returns at 10%. Now, at the end of the first year, your corpus will grow by 10%. But after the first year, your corpus will grow much faster as you get interest on the actual capital and the interest earned in the previous years.
You can see that your investment grows more rapidly over the investment period. That’s the magic of compounding. The longer you stay invested, the more will be the effect of compounding.
Your expenses are limited at a young age, especially if you are unmarried. Other costs like food, electricity consumption, etc., are also negligible compared to a family person. You can use these savings to invest in different investment plans of your choice and let your money grow for your future expenses when you get married and have additional responsibilities to fulfil towards your spouse and children.
Investing in equity instruments, ULIPs (Unit Linked Insurance Plan), and other market-linked products can fetch higher returns than safer investment options like bank term deposits. However, people generally refrain from investing heavily in market-linked products due to the risk involved.
But young investors with lesser responsibilities and higher risk appetite can aggressively invest in market-linked financial instruments, increasing their chances of getting higher returns in the long run. Moreover, even in the event of losses, such investors have enough recovery time to get back on track.
Apart from helping you build a retirement corpus; early investing can also help you in wealth generation. Besides, you can afford to commit mistakes and learn from them while young. While even a few years delay can significantly affect your investment journey, you can potentially find gold by taking small steps right now.