Investing early on in your life can be a massive game-changer for your financial future. Of course, it is not only about compromising on your pursuit of travel, recreation, and other pleasures but also about putting aside something to invest for long-term gains. If you inculcate positive investment habits, then it can help build a stress-free and sorted lifestyle in the near future. Here’s looking at why investing in your 20s can truly change your life.
Why Invest Early On- Compelling Reasons?
Here are some reasons why investing early on in your career, preferably after you get a job and start earning, will be a great move indeed.
- Lesser financial responsibilities, debts, and commitments in most cases.
- Ability to take higher risks early on (you can scale down the risk quotient of your investments once you get older and get married or start a family).
- Possibility to earn superior returns through the power of compounding.
- Investing over a long duration to ride out temporary volatility and fluctuations and reaping the rewards of a solid corpus relatively early in life that you can use to meet various goals.
- Ability to segregate your savings and investments for short-term, mid-term, and long-term objectives.
- Chance to get necessary term coverage for yourself with higher coverage and lower premiums (since you are young and have lower mortality risks, provided you do not have existing illness or have an unhealthy lifestyle). This will help you secure your parents financially in case of any untoward incident down the line. When you get married, you can scale up your coverage to make sure that your spouse is also covered financially.
Let us take an example. Suppose you start at the age of 25 and invest Rs. 5,000 every month through SIPs for 30 years. If the average return rate is assumed to be 12%, you could build a corpus of Rs. 1,76,49,569 approximately, with a total investment of just Rs. 18,00,000 in this period. Now, if you start investing at the age of 35 for a duration of 20 years, then you could build a corpus of Rs. 49,95,740 with a total investment of Rs. 12,00,000 approximately (assuming the same interest rate and monthly amount). So, you can see the massive difference it makes if you start investing early in your 20s.
Tips for Investing in Your 20s
Here are a few tips that you should remember while investing in your 20s.
- Calculate your monthly budget and set aside a fixed sum for investments.
- Make sure you have substantial term life and health insurance coverage (and so do your parents).
- Spread out your investments across multiple avenues to reduce risks and earn better returns. You can consider a mixture of stocks, SIPs and ULIPs, along with retirement/pension plans, PPF, and so on.
- Do not forget to enjoy yourself every once in a while or splurge on a new gadget or holiday that you want. Life is not all about compromises. However, do it with the returns/surplus money that you have instead of the amount you keep aside for investments.
With the right amount of patience and financial discipline, you can build a handsome corpus for the future.
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