What is a good time to start investing?
Harry F. Banks, a famous author, wrote, ‘Do today what should be done. Your tomorrow may never come’. He couldn’t have been more right!
Just like with the other aspects of life, procrastination is bad for your financial planning too. If you want to know what is the right time to invest, the answer is TODAY!
Whether you want to invest in mutual funds, stocks, or any other financial avenues, the best time to invest is as early as possible. Here are some reasons why –
- The power of compounding
Most investment avenues give compounding returns on your investments. This means that you can earn future returns on your past returns. For example, if you invest Rs.100 and the return is 10%, after the first year, you earn a return of Rs.10, and the corpus grows to Rs.110. After that, in the next year, if the rate of return is 10%, you earn interest on Rs.110, which amounts to Rs.11.
Compounding returns can give you attractive returns, but for it to work its wonders, you need to give it time. When you start investing early on, you have a long-term investment horizon. This horizon allows compounding to build your corpus substantially.
Here’s a quick example –
Say you start two investments with the following details –
|Investment 1||Investment 2|
|Starting age||25 years||35 years|
|Target age||65 years||65 years|
|The assumed annual rate of return||10%||10%|
|Corpus accumulated||Rs.3.18 crores (approx.)||Rs.1.14 crores (approx.)|
Do you see the difference in the corpus?
So, don’t wonder ‘when should I start investing.’ Start today!
- Saving affordably
When you start investing early, you can put aside small amounts and still end up with a good corpus. The above example shows how an investment of just Rs.5000 every month can yield a good corpus. So, to save affordably, you need to start as early as possible.
- Tax savings
If you plan your investments carefully, you can save taxes as well. There are various tax-saving investment avenues, and when you start investing in such avenues, you can save taxes from an early age itself.
- Fulfilment of financial goals
Lastly, starting early on with your investments helps you create a corpus substantial enough to meet your financial goals. The compounding factor helps you grow your investments and, if you give them time, they can prove optimal in fulfilling your financial goals.
Now you know when to start investing!
Just like ethics and morals should be instilled in children from a younger age, you should start investing as soon as you start earning. Be the early bird, and you would surely catch the worm.
Don’t get tempted by the promise of tomorrow. When it comes to investments, the good time to start investing is today.
When picking investment avenues, keep your financial goals, time horizon, and risk appetite in mind. Then, pick the right investment instruments like stocks, mutual funds, fixed deposits, etc., depending on your needs.
You can also explore options that are better suited by reaching out to a financial advisor today.