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Top 5 Reasons Why You Should Start Investing Early

15 June 2024 by
Kartikey Keshari

Making early investments at a younger age helps you attain a more immensely secure financial status in the future. This is especially essential when you first start working and possibly do not feel that you can afford to set aside funds for investment. In this article we will descuss about the reasons why you should start investing early.


5 Reasons Why You Should Start Investing Early

Here are five reasons why you should begin investing early in your lifetime:


1. Benefit from Compounding

Indeed, one of the benefits of early investment is compounding, commonly referred to as the eighth wonder of the world. This means that it gives your investments the potential to compound returns over time as you earn returns on the money you invest and also on the profits you make from those investments.




Example: For instance, suppose you have invested an amount of ₹50,000 per year; the account has an average return of 8%. By the time one has reached 60 years of age if he or she begins at 25 the resultant figure would be about 85 Lakh. 

It is really terrible if you start saving at the age of 35 years and by the age of 60 years, your balance would be around ₹ 36 Lakh only. This is still half of the amount you began with even if you started your business only ten years behind.


Checkout:  How the Power of Compounding Works in Mutual Funds


2. Develop Better Spending Habits

It is advisable to start investing early as possible so that frugal spending becomes a part of the daily routine. Signing up for a savings and investment plan that automatically transfers a portion of your income to your savings every month can help create a new mindset in which you pay more attention to your spending.


For example, let us assume that a particular person earns ₹30,000 every month and he wants to save ₹5,000 each month, thus he has to spend ₹25,000.  

It also assists in practising money saving, something most people tend to neglect while using their cards, hence keeping track of areas where the money is spent calls for wiser spending.


Why You Should Start Investing Early


3. Achieve Financial Goals with Smaller Investments

This means that when you start early investment, you can make the intended achievement with considerably smaller monthly contributions than when you initiate later. This is because you have continuous time for the investment as compared to others who may have limited time due to other activities.


Checkout:  Best Investment Options for Young Adults in India.


Example: For instance, let’s consider that you need to save ₹200,000 to cover your child’s tuition fee in 18 years. It indicates that if you start investing early, you may require a minimum of ₹4,500 every month for a development rate of 8% per year. 

If you delay by 5 years, you would need to invest approximately ₹7,500 per month to reach the same goal. One of the best benefits of early investment is that it reduces the financial burden.


4. Higher Risk-Taking Capacity

The young usually have little concern in caring for their families, hence they can afford to assume high risks such as stocks investing. Such investments may yield higher returns in the long-run more than speculative investments like bonds or savings accounts.


Data Insight: A survey by J. P. Morgan Asset Management indicates that for individuals in their 20s and 30s, investors who invested in equities with little regard to the risk, generated higher returns than those who chose to be cautious over a period of 30 years.


5. Potential for Early Retirement

When one start investing early, he will be able to have a cushion in his financial life and can choose when to quit working if at all he desires to.


Example:  If you start investing ₹5000 a month at age 25, assuming an average return of 8%, you could accumulate around 85 Lakh by age 60. If you wait until 35 to start, you’d need to invest about ₹12,000 per month to reach the same amount by 60. The early investment gives you a head start towards a comfortable retirement without a significant strain on your current finances.


Checkout:  Understanding the Importance of Wealth Management


start early investment


Conclusion

Early investment for your future is one of the few best financial decisions you are ever likely to make in your lifetime. It grows your money through continuously earning interest, core Financial literacy, makes you afford your dream goal using minimum cash and directs one to take chances, and lastly, it offers the option of retirement before a remote age. 

Therefore, do not wait for the proper occasion, it is better to start investing from today, for instance, you can begin by staking just a few cents. As the old saying goes, ‘You will never regret putting in the extra effort to develop and enhance your skills.

 So, if you haven't yet begun your investment journey, start now with Kartikey Traders. Begin with small steps, keep it uncomplicated, and continue to educate yourself over time. Remember, building wealth takes time and there are no shortcuts. And as a young earner, your greatest asset is - Time!

Kartikey Keshari 15 June 2024
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