Early investing is a time proven way of wealth creation. It is a tool to achieve future financial goals smoothly. It gives sufficient time to investor to hold the investment and take benefit of compounding.
Reasons to invest Early in your life
- It gives an investor sufficient time horizon to keep on investing. Suppose a person started earning and investing at the age of 23 years. He is expecting his working career till the age of 60. He has long 37 years for making investment. Similarly, a person started investing at the age of 47. He has only 13 years to invest.
- Smartly invested money grows if given enough time due to power of compounding. It is true that “The more you invest, the more you get in future”.
- Early investing helps investor to achieve their financial goals easily. If invested early and incur a loss, the investor has more time to make up for the loss on investment.
- Risk taking capacity of a young investor much more than a person started investing in his fifties. Young investors can go for more aggressive investments since they have a long-time horizon.
- The time value of money increases over a period of time. Purchasing power of money reduces as per the inflation. Early and consistent investment can reap good returns as well as counter the effect of inflation.
A person started investing Rs 20000 per month in a SIP scheme of a mutual fund at the age of 23. He invested continually for 15 years. At the age of 38 he became Crorepati.
|Investment Period||180 months (15 years)|
|Expected rate of return||0.12|
|Corpus generated after 15 years||10091520|
See the above table. This clearly reflects the worthiness of early investment. Although, it is difficult to predict the accurate rate of return in equity investment but historical trends of mutual fund equity investment for a longer duration gives many evidences when people earned even more than 12% return on their equity investments.