Before diving deeper into the topic, let’s take a moment to appreciate that you are taking conscious steps toward understanding and accentuating your financial priorities at an early stage. The main crux lies in creating a substantial corpus that takes care to thrive more smartly in the long run.
In a nutshell, planning your budget means dividing it between income, expense, and savings. This might look like a scary proposition, especially at a young age. But when the journey of investing brings with it financial returns and early retirement, it can also mean financial loss and an ocean of confusion. Therefore, it is crucial to have a risk management process as you start investing.
At the same time, investing your money means holding off on spending it today on something that could bring immediate happiness. But, if you play your cards right and invest early, your likelihood of lifetime financial success increases in multi-folds.
Reasons for investing early
Below are mentioned reasons which suggest ‘investment at an early age is a fantastic idea’.
Getting familiarised with the 8th wonder of the world early: There is significant importance for the time value of money. Early investments mean early compounding of the returns. The time value of money increases over a while. Early investments can reap huge benefits at the time of retirement.
Into the bargain, early investment facilitates your entry into the world of finance early. Your money grows with time. Because of early investments, you can afford things that others might not at that age. It gives you a head start over those who prefer investing at a later stage of life.
Become a Creditor:
With money parked in the right investment avenues at the right age, you have money to lend to others i.e. you become a creditor. When you have surplus money invested, you will never need to borrow money and become someone’s debtor.
By default, we contemplate the future as uncertain, and there will be times when you will need urgent money to meet unavoidable expenses. During such times, the investments made at an early age can prove to be very handy and help you get through the tough times all by yourself. The financial freedom graph starts increasing linearly, thus free from mental bondage.
Early-age investments inculcate discipline, and most importantly, a habit of saving more is developed. Hence it is no surprise that the more you invest, the more you get in the future. To get adapted to this thought process, you tend to save more by cutting on unnecessary expenses and diverting such saved money towards investment.
Improves Risk-Taking Ability:
Studies prove that young investors have more risk-taking ability than older ones. It is an outcome of ‘oh! I have a whole career life ahead’ attitude. One can experiment as much as possible in this phase and conclude the best fit for risk appetite calculations.Adult investors are generally conservative and prefer stability, in turn avoiding high-risk investment avenues. There is an old saying, “More the risk, the more is the reward”. The probability of earning handsome returns at a young age gets enhanced with a high risk-taking ability. However, irrespective of your age, you must have a risk management process in place.
Extended recovery time:
If you invest early and incur a loss, you have more time to cover the loss on investment. An investor who starts investing at a later stage in life will get less time to recover his losses.
Even if there was a lesser risk in investing, a person in the later stage of life refrains from taking the risk in this course of time, he repents for not taking the opportunity and drowns in his own guilt. Hence, an opportunity loss! Thus, with early investments, your investment gets more time to grow in value.
The Mother of all Plans: Retirement
For long-term investment, you need to have proper planning. As a new investor, if you are unable to do it, you must opt for portfolio advisory services.
Early age investments increase the probability of reaching financial stability at a young age which also means one can retire willingly before the actual age of retirement.Saving for retirement from the age of 20s rather than the age of 40s is always a better idea. Life after retirement is more challenging than it has ever been, so planning for retirement now will lead to a happier life after retirement.
We live in a tech-savvy world. You have many platforms to learn and know which investment is best. With the use of technology at a younger age, you can invest in avenues that can give high returns. An investment in self-research gives you confidence and helps you take more bold decisions in your future life.
The earlier you start, the easier it is to build wealth. Yes, you will face some difficulties investing early in life as you don’t have enough money. But you can’t wait for the time when things get convenient for you. Start investing in smaller amounts. Give time for your money to mature.
Investing at a young age is the best decision one can take in life. Don’t shy away from taking portfolio advisory services for even higher returns.