Why Should One Start Investing at a Young Age?
One of the biggest questions that every fresh earner asks the advisors is, why they need to put their money in investments at such a young age. For that, we have a simple answer, i.e., “An early bird catches the worm.”
Investment is made in order to earn a profit, and making that earnings becomes much easier when one gets started early. Investing at a young is not that simple, but if made, the benefits are numerous and can’t be overlooked.
Here are the major advantages of investing at a young age:
1. The Time Factor - Although money is tight in the case of youngsters, the time is always on their side. Compounding - the power to grow money exceptionally higher by reinvesting the earnings in the long tenure - works superbly well when the investments are made at an early age. Long duration is an important factor to fetch the benefit of compounding. It has been proved that the effect of compounding return increases with time and the effective returns are highest during the last cycle of maturity. Thus, youngsters have the advantage to multiply their returns due to the benefit of long journey of life.
For example : An investment amount of Rs.1000 invested for 40 yrs @ of 15% CAGR will offer around Rs.3.1 crore in return. However, if Rs 2000 is invested for 20 yrs @ 15% CAGR, then the future value will be Rs 30.3 lakh.
*The above example is only for informative purposes. It must not be considered an advice or suggestion.
2. The Risk Taking Capacity - The age of the investor has a great influence on the amount of risk that he/she can withstand. As young investors, having a longer tenure of earnings ahead can take on more risk as compared to those in the age of 40s. They can build more aggressive portfolios subject to higher volatility and stand to produce larger gains in the longer tenure.
3. Learn by Doing - The young investors have a great deal of flexibility and time to study and learn the ups and downs of the investments from their successes and failures. They have years to get updated with the market functioning and refine their investment strategies in time. In case their risk-bearing capacity is changed, they get time to rebalance the portfolio in order to maintain the stability of income for achieving their goals.
4. Develop Saving Habits - Many of the investors overlook this advantage, but early investing definitely builds up positive spending and saving habits. Those who take the early investing mode are less prone to having issues related to overstepping their boundaries in spending over the long term. This ultimately helps one in staying isolated from the burden of debts as they manage to live happily with even limited resources.
Saving for retirement is not the reason to make a well-planned investment. There are several avenues like debt mutual funds and equity mutual fund plans with dividend option that provide the opportunity to earn the income stream throughout the life. The twenty-somethings have various benefits of investing early which include the time as well, and those who wait for the right time to invest often fail to weather the increased market risks opportunities to increase future returns.
So if you think that you are too young to start investing, then you are actually taking a big risk on your future financial status. Don’t miss the opportunity to generate riches for your future, and make best mutual funds investment right away on the basis of the perfect recommendations to suit your requirements. We, at MySIPonline, have various financial solutions and investing tools to make your investment worthwhile.
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