When it comes to investing, the earlier you start the better compounding works in such a way that your money grows on itself and what that means is a person who starts investing earlier could end up many times more money when it comes to retiring, although most dreams and goals come with a financial cost attached to it, in our early 20’s investing for future is our last priority, Investing early means that you have to save some money which automatically reduces expenses on unnecessary items.
Regular investing will make them disciplined from a very young age and discipline is the one thing that separates the best investors from the rest.
Let’s take an example-
Rohan aged 25 starts investing ₹3000 per month till the age of 60 in a mutual fund that gives about 10% returns. Rohan will end up with over ₹1.15Cr when he reaches retirement, whereas Yash starts investing the same amount of money per month from the age of 35, but ends with a lot less as compared to Rohan.
Details | Rohan (Age 25) | Yash (Age 35) |
|---|---|---|
Amount invested | ₹3000 per month | ₹3000 per month |
Number of years saved for | 35 | 25 |
Rate of return at | 10% | 10% |
Total amount Invested | ₹ 12.60 lakhs | ₹ 9.00 lakhs |
The amount at the age of 60 | ₹ 1.15 cr | ₹ 40.14 lakhs |
This is known as The magic of compounding.
The magic of compounding can only be seen when you have time by your side.
But the real question is how to begin?
When to invest?
The answer to this can be answered by a very simple yet intriguing quote.
The best time to invest was yesterday, the next best time is today!
Taking this into consideration, start your investment journey as soon as you can. You can start with as low as ₹100. Investing is not rocket science, starting even at the age of 18, is no big deal.
Investors want to make investments in such a way that they get high returns as quickly as possible without the risk of losing principal money In reality, risk and returns are directly proportional, they go hand-in-hand, i.e., the higher the returns, the higher the risk and vice versa.
Diversification is a corporate strategy that helps in risk management that mixes a wide variety within a portfolio because protecting your capital is as important as making money
Select a strategy and stick to it, every purchase carries a fee. More importantly, selling assets can create a realized capital gain. These gains are taxable and therefore, investing in quality companies with good management, brand value, historical growth, strong market share in the industry keeps you in the long run
Where to invest?
Investing in your early 20’s benefits you to be a risk-taker as you have fewer responsibilities and long working life in your hand
This is why equity-oriented investments like
Direct Equity
Over a while, equity has been able to deliver a higher rate of return as compared to other options but it also risks losing higher capital or all your capital until and unless one opts for the stop-loss method to restrict their losses. One can invest directly using a Demat account
Equity Mutual Funds
They allow you to invest in the capital market without having to worry about choosing individual stocks or sectors. They have expert managers to research for you at a nominal rate. If it's an ELSS fund There are a variety of tax benefits available which allow you to save taxes, you can opt systematic investment plan (SIP) means you have to invest a fixed amount of money at a regular interval. There is an amount of risk associated since their return depends on market conditions generally they are known to deliver around 10-12% returns depending upon which sector you are investing in
Would be better options as compared to something like purchasing gold or investing in fixed deposits when you have less responsibility and low capital for investment.
Start small but start now
Happy investing!