How investing early can make your future secured?

Start early for secured future

We, at some point of time in our life, have seen some of our friends and family members not having good time in terms of finances. They regret their decision of stepping into investment world late. Started investing late and wish for some holistic guidance. There are many surveys and studies which proves that money invested early will make you richer in life. Many industry experts believe that people who start investing early (may be with first paycheck) become financially discipline and prudent than their peers.

Mutual funds are an excellent avenue to start your early age investments. Mutual funds diversify your portfolio by minimizing the risks and increasing the profitability. There is plethora of schemes available in mutual funds market in order to meet financial needs of all the investors. Mutual fund managers indulge in-depth study of market in order to ensure higher returns to investors. Mutual funds schemes are broadly classified into three main categories: -

Equity oriented schemes

Young investors can consider these as these generate huge returns by investing in stocks of top performing companies . These schemes demand the funds to stay locked for at least 5 years in order to get the advantage of compounding. Since young investors have more time and risk appetite, they can confidently go for equity-oriented schemes.

Debt-oriented schemes

Debt oriented scheme will provide lesser returns and are less risky than equity schemes. Investors who are starting early and have low salary can choose debt-oriented schemes.

Hybrid schemes

Hybrid schemes as the name suggests comprises elements of both debt and equity schemes. Young investors who want high returns with minimal risk can opt hybrid schemes to start their investing trajectory.

Having said that! Stepping into investment world through mutual funds has many advantages which are mentioned below:

Compounding benefits

Compounding benefits are attained when you earn interest on interest from your investment. It is many a time referred as “magic” in investing world. Whenever an investor reinvests the earnings back into the scheme then his/her wealth grows exponentially. Monthly SIP of as low as ₹ 1, 000 will be having a great impact on your finances in future. This could be understood by the example given below:

The above table clearly shows that X who started at the age of 25 years is much ahead than Y who started 5 years later. The difference of 5 years led to huge difference in the wealth of X and Y at the age of 60 years. Therefore, it is important to start investing early in your life to take the full advantage of compounding.

Risk appetite is high

Investors have the ability and willingness to take risks in younger age since they want to experience most of the investment avenues and sometimes bet goes wrong. However, this does not bother them much because they can recover their losses in coming years. Investors become conservative in later stage of life because of family responsibilities and less savings hence are more cautious which also result in lower returns. If we go by the old saying, “more the risk, more is the reward” then younger investors can accumulate huge amount of wealth by starting early. Mutual fund is a great tool which attract lots of younger investors due to high and consistent returns. Many investors start investing via systematic Investment Plans (SIPs) since their salary is comparatively low at younger age. However small SIPs on a monthly basis prove fruitful to them in later age of their life. Equity and equity-oriented funds see influx of investments by younger investors because equity-oriented schemes are relatively risky but fetch high rewards.

Tide over emergencies

The pandemic has taught many lessons but the most important lesson for investors is that emergencies can pop up any time and having a financial cushion is very crucial for facing the emergencies. This becomes extremely important for the generation who believes in “You Only Live Once” principle. Investors who have started pouring funds into investment early in their life sustain the pandemic easily while there are others who started late whose most of savings got exhausted during lockdown. Hence, having money handy in difficult times can lessen your financial burden.

Financial discipline

Investors starting early in their life become financially disciplined i.e. they remain consistent with their investments and did not indulge in unnecessary expenditures during their early ages. During lockdown people reflected that how much is their indulgence in traveling, eating out, paying EMIs and credit card bills as all these factors affected their savings. In countries like USA and Britain young people started saving since they are left with surplus amount of money which were saved unintentionally as traveling and eating out costs came down significantly. Even in India, most of the mutual fund and trading companies recorded highest ever rise in opening of accounts. Therefore, financial discipline is essential if you want to have huge wealth in your retirement years

Happy retirement life

Everybody waits for his/her golden time i.e. retirement life. Golden years can be really stress free if you have enough corpus to meet your old age expenses. Starting early with mutual funds can help you enjoy multiplier advantage in accumulating the retirement corpus. Therefore, planning early for retirement will make you financially stable when you will reach your golden years.

If you want to know more about retirement planning, please click this link: https://sipfund.com/blog/Retirement-Planning-through-mutual-funds.html

Summing up

A tech-savvy generation has many platforms to invest which often lead them into the dilemma of choosing the best. This dilemma can be resolved by talking to a reliable mutual fund expert who will guide you and help you throughout your investment journey. The best part of starting early is that by the time you reach 45 you will be equipped with so much knowledge of investing that you can even guide others and make a choice related to your portfolio. Everyone waits for the convenient time to start but that time never comes because as you age, your responsibilities increase therefore it is better to cut your wasteful expenditure at early age in order to enjoy a large corpus of funds later in life. Investors with good amount of wealth may not feel a need to take a loan since he already has enough money available to meet his financial goals. On the contrary, investors who started late may have to take up loan due to insufficient funds which will make him more financially stressed since a large portion of his wealth will go towards paying back loan. Therefore, money invested in right avenues at the early of your career can make you financially secured.

Happy investing!

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