5 Reasons Why You Should Start Investing Early In Mutual Funds?

Published On: 13-Feb-2020

A wise man once said, “the best time to plant a tree was 20 years ago; the second-best time is Now.” This quote not only gains its relevance in the World which is getting warmer every year but is equally relevant in the financial world. 

 

 

Here are 5 top reasons why you should start investing early in mutual funds:

1. Wealth Creation :

It is always advisable to start early to invest in mutual funds as it equips you with the luxury of time to create wealth, as well as the flexibility to your financial plans over a longer period. For any financial plan to succeed, your savings act as the base foundation for your financial plan and you will also know that stronger the foundation, more robust are your financial plans. 

2. Benefit from the Power of Compounding :

Compounding refers to the phenomenon of earning returns from your existing returns. With the power of compounding, your investments grow at a much faster pace as you allow them more time. ‘Time’ is indeed the accelerator to your investments’ potential of growth. For example, investing Rs. 10,000 per month for 20 years may help you achieve a portfolio of around Rs. 1.20 crores at the end of the period (assuming 12% CAGR). However, starting to invest 10 years earlier may help you increase your investment tenor to 30 years and increase the portfolio amount to Rs. 3.60 crores. 

However, you must also realize that you may not be able to witness this power overnight, but you can undoubtedly harness its potential over a period. It might be annoying to watch a rose plant grow every day, wherein you may not notice any difference daily, but the rose flowers in the blooming season may be a delight for you to watch. The same is the case with your investments, wherein the power of compounding may make your money work hard for you and make them grow exponentially when enough time is given to them. 

3. Adding Financial Discipline to your life :

The earlier years of life are always the best learning times. If you have started to invest at an early stage of your career, you have already committed yourself to your financial plans. SIP enables you to make regular investments across market ups and downs and inculcate a sense of financial discipline into your lives. 

4. Keeping your Financial Goals within your sight :

While the Investors stay concerned about investing at the right time and keep on asking ‘when to invest in mutual funds,’ they must realize that over more extended period, it is not about ‘timing the market’ but ‘time in the market.’ As one starts to invest early, the financial plans to achieve your goals tend to stay flexible and with longer investment horizon in hand, one may choose Plan B as well, if Plan A does not work out nicely. Having alternate financial solutions may also help you stay de-stressed over your financial journey and helping you keep your financial goals in sight, now and always. 

5. Improving Risk Appetite :

It is a time-tested fact that younger people have a better risk appetite to invest in equities and stay aggressive in their financial plans and the risk profile steadily shifts to conservative as the age increases. It is much easier to digest the volatile market movements while you are young, as you enjoy the luxury of time to make amends to your financial plans if something goes wrong. As such, if you have started investing at an early stage, you would be more aggressive to invest in equities, thus staying in a convenient position to harvest the potential of higher returns over more prolonged period. 

As such, it is always advised to start investing early. If you have not started investing till now, take your first step now. 

Disclaimer : The information shared above is for illustrative purposes only and should not be construed as advise. The above is to illustrate the concept of asset allocation. There is also a possibility of the expected event not happening or some other unforeseen event that may affect the future performance of asset class. Investors are requested to note that there are various factors domestic and global that can have impact on performance of the asset class mentioned in the article. Information given is available in public domain.