Five reasons to start investing early

Imagine if you had started preparing for your exams early? If you had started reading early, learning early, and even exercising early... you'd be at a much better place, wouldn't you? So is the case with your wealth-building journey. The sooner you start investing, the better off you'll be down the road.

Though many people feel one should wait until they are older (in their 30s and 40s) to start investing, it's not the best course of action. Here are five reasons why:

Take advantage of the magic of compounding

Albert Einstein, one of the most brilliant minds, knew the immense power of compounding. He once remarked: "Compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn't, pays it." If you start investing early, you can benefit from this phenomenon. Compounding happens when you make interest on your interest, which also includes your original investment. Your investment grows exponentially as a result of this snowball effect.

You'll be shocked at how much money you will amass, even if you start with a small amount each month.

Consider you started investing Rs 2,000 each month at the age of 25. If your investment earned 12 per cent annually, your investment of Rs 6 lakh would grow to Rs 37.95 lakh by the time you turn 50.

If you keep investing the same amount for another ten years, your total investment of Rs 8.4 lakh will mushroom to a massive Rs 1.3 crore. You read that right, and no we haven't added a zero by mistake.

That's the miracle of compounding!

As you can see, the more time your money has to grow, the faster it will compound - and the more money you will ultimately have. By investing early, you can build a sizable corpus because your investments get time to build up.

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Even small amount of money can work wonders

Don't worry if you're just getting started and don't have enough money to invest. You can start an SIP for as little as Rs 500 a month.

Investing a small amount slowly but steadily can lead to a bigger corpus over time, as you saw in the example provided in the first point.

You can always increase your contributions when your income increases over time.

The secret is to start investing early and to do it diligently. However, if you continue to wait until you have amassed a substantial sum before investing, it might already be too late.

You'll have more time to make up for any mistakes

By starting early on your investment journey, you get to correct any beginner mistakes. It can give you more time to educate yourself, experiment and explore strategies that work best for you. Assume something bad happens that causes you to lose money. You still have time to recover. You will learn to handle the risks of investing better.

However, if you wait until later in life to begin, you will need to be more cautious, and your ability to take risks will likely be more constrained due to increased life responsibilities. Your twenties are the time to experiment and learn because time is on your side.

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You can meet your financial goals sooner

When you start investing early, you reach your financial goals early, which can also include early retirement. Early investing can assist you in achieving your financial goals quickly, whether you want to buy a home or a car.

Additionally, you'll have more time to enjoy your money. If you wait until your thirties or forties to begin investing, you'll be less likely to have enough time to let your money grow. However, by starting young, you might not want to keep all your money in investments after retirement. Instead, you can use it to enjoy your golden years.

You'll be better prepared for adversities

At some point, your finances may become unstable, but by kickstarting your investment journey you'll be prepared to face such low phases. Early investing can help you overcome such tough periods as you would have enough money to tackle tough phases.

As former US president John F Kennedy once said: "The time to repair the roof is when the sun is shining." The same is true in the case of investing. So, start early and hit the road of financial freedom.

In case you need help on how to start your investment journey, visit Get Started, our specially curated page for beginners.

Also read:
How young investors can begin their journey
Start now for a lifetime of wealth

This article was originally published on September 20, 2022, and last updated on August 21, 2024.