In the 21st century, a lot has changed. People’s lifestyle, their career choices, their earning potential, and so have their ways of saving and investing. From having a savings bank account and saving for an FD to investing in mutual funds and the stock market, every method, as well as perspective, has changed. From millennials to Gen Z, everyone is interested in improving their lifestyle. In order to do that, they don’t mind taking every possible measure that takes them one step closer to their goal.
Making the right investment decision and starting early with your investment can significantly impact your financial well-being in the long run. Two major reasons to go ahead with this decision include:
- Establishing good savings habits irrespective of your savings goals.
- The sooner you start, the longer your money has to grow over time, giving you more ROI.
There are several other benefits of starting early with your investment, some of which have been mentioned below by our SEBI-Certified Research Analyst, Ashutosh Bhardwaj. Check them out:
- Build Financial Discipline: Once you start with the financial investment, you will observe a disciplined side of yours that will go a long way in keeping you on track as well as reaping good benefits. If you have a long-term perspective regarding your investment, which you certainly do, you are sure to go a long way. If you decide to start developing good financial habits earlier in life, it will have a progressive influence on your financial health.
- Fast Growth of Money: If you put your money in a savings account and go ahead with a Fixed Deposit (FD) or Recurring Deposit (RD), it will without a doubt give you some benefits in the next 3 to 5 years, depending upon the time duration of its maturity. On the other hand, if you bank on stocks or some other financial instrument, you will see instant returns on your investment, and that too, manifolds. Thanks to the compound interest it works upon.
- Goes beyond Savings: Just like your priorities in life change, the reason to save for such and such goal changes as well. Similarly, the ability to invest in financial instruments, changes as well. Once you start investing at a young age, you certainly are to get more benefits that will motivate you to keep going with this investment style and reap as much benefit as you can. With time, your investment skills will also improve and your ROI will multiply.
- Endure the Blow of Inflation: If you start investing in the stock market in your 20s, and the world suddenly comes to a halt like what happened during the COVID-19 pandemic of 2020, you can manage well. So many people lost their jobs and life savings because of the uncertainty of their finances. But with a better understanding of the money market and following the right strategies with the right mechanism usage, you can save a lot of money that will become your saviour during hard times like that.
- Maximizing Returns: It is quite evident even with the FD and RD that “the longer your money is invested, the more opportunity it has to earn returns”. If you keep postponing and waiting for the right moment to enter the market and exit at the earliest, it will give you fewer benefits as compared to the investments made for longer durations. You are not just delaying investing, you are also missing out on potential gains. If you are planning to invest at a later stage in life, you might (definitely will) need larger contributions to achieve that same amount of ROI.
- Tax Advantages: When it comes to long-term capital gains, India has numerous provisions under which you can save a huge amount of tax money. If you start investing early, you can bank on these tax benefits and reduce your tax liability as much as possible. You can claim tax benefits under these acts – Long-Term Capital Gains (LTCG) Tax, Securities Transaction Tax (STT), Dividend Distribution Tax (DDT), and some schemes like equity-linked savings schemes (ELSS), etc.
- Higher Risk, Higher Returns: It is totally your call whether you want to go ahead with a short-term investment (2-5 years), a medium-term investment (5-10 years), or a long-term investment that goes up to and beyond 10 years. It is a common sight to make some trade-offs over long-term goals, but it is also to be pondered that the longer you stay, the more returns you might gain. All you have to do is keep your goals as simple as possible and create a consistent pattern of this behaviour. It will eventually help you keep a tab on your investment and help you attain the amount you want to save.
- Harness the Power of Compounding: If you are a millennial or a Gen Z (even better), you have plenty of time to start investing early and use it best to your advantage. Thanks to the ‘compounding interest’ nature of investment opportunities, you will witness substantial returns on your initial investments, even if the invested amount is insignificant. With that certainty, you can build a strong financial foundation for your future. In short, the earlier you start investing, the more compound interest you will gain on your venture capital. Because it is most beneficial in the investment horizon.
Now with this better clarity on why and how to invest early, it’s time you get started with your investment game. To have more in-depth knowledge on how market analysis can help you gain maximum in the market, you can check out the online courses offered on Logical Nivesh where our SEBI-Certified Research Analyst, Ashutosh Bhardwaj will assist you in understanding the ABC of the financial world.