There are uncountable benefits of starting investment early. When a Banyan tree is planted it takes several years to grow but it keeps on growing, slowly it occupies a huge space and it provides shade & shelter for many years. Likewise, the proper early investment will result in a huge corpus in the long run, which can become so large that not only you will become wealthy, your next generation will also be. I shall describe a few very crucial points regarding Incredible benefits of early investment here.
The early stages of your earning career are very crucial as it will have a very big impact on your future finances. For getting the benefit of compounding the key is to start investing early. The term Compounding means earning interest on the principle amount as well as on interest earned. So, with the elapsed time principle amount becomes huge & eventually, your wealth grows exponentially over time.
Let’s take an example for better understanding
Mr. X is 20 years old & Mr. Y is 25 years old. Both of them decided to start investing for retirement at an age of 55 years.
Mr. X started investing Rs. 2000 per month for 35 Years & simultaneously Mr. Y also started investing Rs. 2000 per month for 30 years. Let’s assume that return of investment @13% per annum (Nowadays many Large-cap, Midcap, Small-Cap & also Flexi-cap mutual funds generated more than 13% returns in the past).
The corpus that will be available with Mr. X will be 1.4 Crores (if Compounding is considered annually) after 35 Years; The corpus that will be available with Mr. Y will be 75 Lakhs (if Compounding is considered annually) after 30 Years. The corpus of Mr. Y is almost half the amount of Mr. X because of 5 years of late investment. Now both of them increases their investment by 10% then the difference will be much higher.
The corpus that will be available with Mr. X will be 3.76 Crores (if Compounding is considered annually) after 35 Years; The corpus that will be available with Mr. Y will be 1.85 Crores (if Compounding is considered annually) after 30 Years. The corpus of Mr. Y is less than half the amount of Mr. X. This is the power of compounding.
Some more benefits of early investments are:
- Regular Investment will bring discipline to your spending habits and you will start tracking your expenditure.
- Early investment will allow you to take the calculated risk and also will bring the ability to recover from losses.
- You can enjoy a better and quality lifestyle with better affordability.
- You can retire with a huge corpus with great financial stability.
