Be An Early Bird Not An Angry Bird

Mar 30, 2017 | 12:27 PM IST

The early bird catches the worm. This saying holds absolutely true when it comes to investment. If you start early, there are various advantages you can reap. Whatever may be the form of your investment, if you are an early starter, you have a better chance to multiply your portfolio manifolds. But if we have to talk about a specific investment instrument, then let's talk about the medium which gives the highest returns on investment (ROI) - equity investment.

Here are 5 Reasons for you to start investing early, and preferably in stock market.

Save More, Earn More

Starting investing early gives you a natural edge as you get a lot of time ahead of you to invest. Not just that, when you start saving in your early twenties (mostly in your first job), at that time your liabilities are less i.e. home loan, personal loans, so you can divert that money into savings. As you set this habit early on, it is very likely that you carry it on for a long period of time which will only give you good results in the future. The only thing to keep in mind is - as your income grows, you have to increase the quantum of your investment as to get the better results.

Higher Risk Appetite

Starting early has another distinct advantage - higher risk appetite. Yes, among the investment instruments available, there are various instruments which offer good returns at an expense of moderately higher risk. For example, you have saved 20,000/- and you want to invest it. Options available for are - fixed deposits, mutual funds and equity. Amongst these three, fixed deposit is the safest, but offers low returns and equity is riskiest, but extremely good results can be expected.

So when you are young you can afford to take more risks as you have time on your side. And if you play your cards right, most often than not, the risks will pay off.

Longer Investment Span = Better Results

The thumb rule of investment is - longer the better. Yes, if you have a long-term investment perspective, not only you get better monetary returns, but it also saves you from a lot of nuisance value. Imagine you are investing in stock market with long-term view, you would not have to worry about things that give short-term investors sleepless nights. Things like - quarterly results of the company, companies' performance on a Y-O-Y basis, impact of government policies, etc. The general observation is that good company outlive all the adversities and provide sterling results for a longer period of time.

Experience The Power of Compounding

Compound interest is one of the most important reasons why you should start investing early. There is a maxim about compound interest - those who understand compound interest, earn it; and those who don't, pay it. Let's understand the power of compounding through a simple example. If you invest 1000/- and you get 10% interest per year. You will have 1,100/- after one year, right? The 100/- interest is on the principle amount. But the fun starts after the first year as you earn the interest on your principle as well as on the interest you have accrued till date.

Like this, every year you will earn more and more interest which simply means the longer you stay invested the more money you will make through compounding. Ain't that a sweet deal?

Retire Early, Retire Rich

Most of the young Turks of today's generation aspire to retire early. By retiring early they don't mean to turn into a couch potato or a grumpy old man, it simply means to quit the job and pursue their entrepreneurial dreams. So to accomplish that, if you start saving in your early 20s and you keep investing in a disciplined and a timely manner, by the time you are in your mid-forties you would have a big enough corpus to retire early. However, to reach that level you ought to have a robust planning and well thought out investment plan. Equity investment plays a key role in the scheme of things.

 

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Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to pave a smooth road for our clients in the shaky world of stock market. While...
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