Investment Plans 334 views October 16, 2021

“A good start is half the job done” – A proverb that you must have heard numerous times. But the start should happen early too when it comes to matters concerning your financial security through investments. In the absence of the same, the money generated may not be enough to take you through inflation years later. Regular income usually stops for most after 60. And at that time, if your investments do not yield you the sum needed to live peacefully from thereon, you may have to compromise on your lifestyle afterward. But why be forced to live that way when you can start investing early to live peacefully while you stop earning. Reading this article further should hopefully convince you to make investments early. Let’s start!

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Reasons That Call for Early Investments

Laying a strong foundation is important for a hassle-free financial journey. Things will keep changing and bringing a mix of good and bad financial developments for you to deal with. But an early start can help maximize good things and offset the bad stuff with the former. Let’s see how an early start makes all these statements true.

Power of Compounding Effect Takes Your Investments to a Massive High

A secure future lies to a great extent in how much you have invested in equities over time. The reason for recommending stock investments is that the money put here grows exponentially over time due to the ‘Power of Compounding’ effect. And when more investment time is allowed courtesy starting early, the money can grow way beyond expectations. For the unversed, in compounding, an individual can earn interest on the principal amount as well as interest.

For example, if you start investing INR 7,000 per month in stocks by the time you attain 45 years, you will earn interest worth around INR 22 lakh, assuming the return rate is 12% per annum. The total investment value inclusive of interest would amount to around INR 34 lakh. We have assumed that you won’t be having income to invest after 60. So, only a 15-year investment horizon is considered for the calculation. In case you do after attaining the age of 35 years, the same investment amount and the return rate will take your investment value past the 1 crore mark over 25 years. That’s the difference starting early makes to your equity investments.

You could choose to invest in equities either directly or take the route of life insurance or mutual funds to do so. In case you don’t know the dynamics of the equity market, don’t invest in it directly. Instead, take help from fund managers who channelize your investments effectively in response to market developments. Such invaluable services are available when investing through life insurance plans or mutual funds.

Risk Appetite Remains High Early

Stock investments come with a high degree of risk; negative market developments can decrease your investment value too. So, these investments suit the ones having a high-risk appetite, which remains the case mostly when you are in your 20s or 30s.

Starting Early Gives You More Time to Recover Lost Grounds

As said above, investment value can come down due to negative market cues. But you can recover lost grounds, if any, and achieve the goal easily by starting early. In case you begin late and negative cues sustain for long, you could fall well short of the goal amount, causing financial security concerns for yourself and your family.

Low Cost of Investment

Investing via life insurance plans comes with the distinct advantage of low costs when starting early. Premiums of these plans remain much lower when locking a deal in the early 20s compared to doing later in your life.

Early Retirement Possible

We have already hinted above about a massive corpus to have when starting early. It could well generate the required corpus much before you may plan for, thereby helping you retire earlier. Hope that remains the case with you and keep the early retirement option open for you.

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