Why you need to start investing
There are some things in life that are good to do. Then there are some things that are a ‘must do’. Investing falls in the latter category. Here are a list of reasons why you must start investing and also start your investing journey early.
It puts you on track to achieving your financial goals: Dreams and aspirations become a part of you from an early age. At first, they are all about buying the perfect bicycle or acing a test. Over time, they become bigger and more concrete. Every one of you probably dreams about buying their own house, driving a new car, giving your children a great education, and even having a comfortable retirement period. To achieve each of these dreams, you need to have money. Now, the thing is that, unfortunately, most people don’t earn enough money to actually achieve all their dreams. So, does that mean you should just give up. No. What you can actually do is save and invest your money. When you do this, you ensure that after a certain period of time, the money that you save and invest will grow into a substantial corpus. A sum that you can then use to accomplish your financial goals.
It becomes your friend in need: If there is one thing that is certain in this world, it is that life can be uncertain. You never know what tomorrow has in store for you. An unexpected health or medical emergency can be a big drain on your savings and derail you from your financial plan. Thus, it is absolutely imperative for you to create an emergency fund that can come to your rescue in your time of need. Now, just keeping your money under the pillow will not solve this problem as inflation will erode the value of your savings. Instead, you need to invest your money in safe and liquid investments that can generate some returns, are safe from capital erosion, and are easily available to you.
The early bird gets the worm: If you want to create long-term wealth, then equities can be a great investment vehicle. However, it is well-known that equity markets can be highly volatile in the short-term and impact your ability to both make sound investment decisions and benefit from the wealth creation potential of equities. Thus, if you really do want to secure your future and achieve your financial dreams, then it is important for you to not only start investing but also start investing as early as possible. When you start investing early, you are better positioned to invest for the long-term and ride out equity market volatility.
Further, investing early also gives you an opportunity to benefit from the power of compounding. Dubbed as the ‘eighth wonder of the world’, compounding is a mathematical process that ensures that both the principal amount invested and the interest earned on an investment, generate returns. For example, assume that you invested Rs. 1000 at 10% interest per annum. Now, at the end of year 1, you will earn 10% of Rs. 1000, i.e., Rs. 100. Now, at the end of year 2, you will earn 10% of Rs. 1000 (your principal amount) and 10% of Rs. 100 (the interest generated in year 1). As a result, at the end of year 2, your investment will be valued at Rs. 1210. Over a period of time, due to compounding, the value of your investment will grow exponentially, and you will be several steps closer to achieving your financial dreams.
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