Investment is truly a journey that goes through planning, budgeting, saving, investing and discipline over a period of set milestones. Many youths wonder: when should I start investing?
When should you start?
Instead of answering this question theoretically, a more appropriate approach is to see the results or impact of starting at different stages of life. A statistical understanding of this impact may give a clear understanding about the best time to start investing.
Assumptions: an adult starts earning at age 22 and aims to stop at 60 (38-year earning span), investment returns 10% annually, and the investment amount is stepped up by 10% every year.
Perspective 1: The positive impact of starting early
Target maturity amount: Rs 2 Crores. If a person starts investing at age 22, they need to start with only Rs 1,200 every month to reach Rs 2 Crores. A delay of 5 years means monthly investment should start with Rs 2,250 — almost double. If one does not start till age 35, the monthly investment needed will be more than 5 times what was needed at age 22.
Starting an investment plan right after getting your first job allows you to invest very small amounts which may not be difficult for most. We don't even have many commitments at this age, so saving a small amount is easy.
Perspective 2: The negative impact of starting late
Assume an investment of Rs 1,200 per month irrespective of the age at which one starts. One who starts at 22 will accumulate Rs 2 Crore, whereas just 5 years of delay means only about 50% of the maturity amount (Rs 1.06 Crore). If someone does not start till age 35, the maturity amount will be only Rs 38 Lakhs.
Power of compounding plays a huge role in deciding our maturity amount. Longer we invest, higher the returns could be.
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Key takeaway
Start investing as young as you can, ideally from the time you get your first salary. Even Rs 500 of monthly investment at age 22, with annual step up by 10 to 20%, is a very strong start.
Are you also one of those who did not start your investment yet? It is never too late — start it right away with as small an amount as you can.
