Everyone keeps taking the (financial) moral high ground and telling everyone else that they should start saving early.
But what if you couldn’t?
What if in your younger years, you just couldn’t begin your investment journey?
The reason could have been personal and hard circumstances. Or it might be due to laziness.
While starting early has tremendous benefits when it comes to investing, all is still not lost if you are a bit late to the party. You can still achieve your financial goals.
If you are already in your mid-to-late 30s, then you still have a long enough runway of about 20 years to get things in place. If you realise that you need to invest in the 40s, then you really cannot delay it any further. You just have about a decade or so left.
Most people are busy saving for the house or repaying a home loan, then they give priority to the children’s future and save for that. In all this, quite often what is neglected is the retirement savings. Most people ignore retirement because first they think their provident fund will be enough (which is not true). And the second, they feel that retirement is decades away and hence, doesn’t deserve their immediate attention (again not true).
But if you are starting to invest late, you are no doubt at a disadvantage over those who began early. But still, there is something that is in your favour. In your late 30s or 40s, you would be earning a lot more than what you would have earned early in your career. It’s also possible that by 30-40s, a few of your goals might already be over, like a house purchase.
So, if you look at the middle years of your working life, you would have a higher capability to invest more regularly due to your higher income and surplus. And this works in your favour.
Let’s take a small example. Suppose a 27-year old starts investing ₹10,000 monthly in equity funds. He also increases his SIPs by 5% every year. By the time he is 37 or 10 years into his investment, the value of his regular investments would be about ₹23-24 lakh at 10% average returns.
Compare this with his same-aged friend who starts a decade late, that is, he starts his journey at 37. But because he now earns much more than what he or his other friend managed at 27, he can invest close to ₹40,000 monthly. He too intends to increase his investments by 5% every year. So, if he does that, after 10 years, at his age of 47, his corpus would be at ₹95-96 lakh.
And what about the first friend who had already been investing from age 27 to 37 and what if he continues what he was doing till age 47, i.e., for a total of 20 years? He would have accumulated about ₹1 Cr.
Of course, the first friend had to invest a lesser amount because he started early and his investments got more time to compound. But even the second friend was able to achieve the same end result. He did have to invest a lot more. But that is what will happen if you start late.
Don’t get me wrong here please. I am not saying that starting late is good. It isn’t. You should start as early as possible when investing. But what I am trying to highlight is that even if you are late, you can compensate for the delayed start by investing higher amounts.
So, no matter what your current age is and irrespective of whether you have started investing seriously till now or not, make sure you don’t delay it any further. The more you do, the more you will have to invest. Start today. Don’t regret the past. Move on. Focus on what is the right thing to do next and then begin doing it.
If you are unsure how to go about it or if you really feel you are a bit too late, then it’s best to take proper advice from an investment advisor.
Dev Ashish is a SEBI-Registered Investment Advisor and Founder (Stable Investor). He provides fee-only financial planning and investment advisory services to small and HNI clients across India.