Most people don’t think about when to start investing in the initial stages of their career. In fact, investing and saving for future is hardly a priority at that point. But the reality is that in investing, there is nothing like too soon. You can begin your investment journey with a very little amount as well. In fact, starting early gives your money more time to grow.
To begin with investing, there is no better time than present! Here are few simple reasons for you to start taking charge of your finances; it can help you to know why to start investing. To give you an indication to start investing we list out some factors.
Make up your mind to save as soon as you start earning!
The perfect time to start investing is when you are young, healthy and independent. Here is why it makes sense to start investing early; here are key reasons how and when to start investing for future that can work wonders for you.
- Long-term compounding
Power of compounding can do magic if you keep you invest for the long haul.
Let’s take two different scenarios to understand this.
✓ Scenario 1: Suman started an investment of Rs 5,000 per month at the age of 25. By the age of 60, his investment of Rs 21 lakh would fetch around Rs 1.9 crore, assuming the rate of return as 10% per annum.
✓ Scenario 2: Rahul started an investment of Rs 10,000 per month at the age of 35. By 60, his total investment of Rs 30 lakh can only fetch around Rs. 1.3 crore, assuming the rate of return as 10% per annum.
Retirement corpus is lesser in the second scenario even if the invested amount is more! That’s just because investment was started ten years later. Such is the effect of time and compounding!
Tips: Start investing in systematic investment plan from your very first salary
Clarity on future goals indicates there is a need to invest
Formulate an investment strategy once you have recognised your financial goals. For example, you may want to set aside money for your marriage, which is 12 months down the line. Now that the end target is precise, you can start to fine tune the investments to reach that goal. You can similarly create long-term goals and invest accordingly. A well-calibrated investment strategy will help you realise your goal in the long term.
There are some strong indicators that tell you to start investing. They are:
1. You have your financial goals penned down. This is the first step of financial planning. This is because you know how much money you need and when. It also means that you are “investment ready”.
2. You have paid off your outstanding loans and still have some cash in hand. This will help you build your investment kitty.
3. When investments aren’t meant to merely save taxes.
Here are a few investment strategies for beginners:
✓ Start today! There is nothing called the right time. The sooner you start, the better for you. Waiting for the better job and better salary will only make you miss the opportunity.
✓ Take help of advisors. You can make a better choice with their help.
✓ Know the products that you are investing in. Understanding the product helps you make an informed decision.
✓ Start with simple options in the beginning. Start by investing in options like mutual funds and then proceed to other asset classes like equity.
✓ Monitor and review your investments.
✓ Increase investment amount with time.
✓ Create emergency fund. Try to keep at least six months’ worth salary in this fund.
Starting early is the key to success. So, take charge of your financial future and get started as soon as possible. Keep reviewing your investments regularly and track their growth. This will help you reach your goals successfully.