Sometimes doing the right thing is not enough, one needs to do it at the right time also. This doctrine applies to investing as well.
Investing in equity is, undoubtedly, important to meet your financial goals, but it is also important to start it as soon as you start earning.
Investing at a young age can offer a multitude of advantages that can shape your financial future. With a booming economy and a young workforce, there are numerous opportunities for growth and wealth creation in the market.
Here are the five reasons that explain why investing in your 20s can be a game-changer:
The power of compounding
One of the biggest advantages of investing early is the power of compounding. Compounding refers to the ability of an asset to generate earnings, which are then reinvested to generate even more earnings. As the process continues, the pace of wealth creation gets faster.
By starting early in your 20s, you can harness the power of compounding and significantly increase your wealth over time.
For example, if you start investing ₹10,000 annually in your early 20s in an investment that delivers an average return of 12%, you could potentially accumulatea corpus of ₹1 crore by the time you reach your 40s.
Access to high-growth sectors
India is home to several high-growth sectors that present lucrative investment opportunities. Sectors such as e-commerce, healthcare, renewable energy, and technology are rapidly expanding, fuelled by a growing middle class and favourable government policies. Investing in these sectors at an early age can provide substantial returns in the long run.
Companies that started as small startups havegrown into multibillion dollar giants. Investing in such companies during their early stages can yield exponential returns.
For example, Ravi, a 25-year-old professional. Ravi decides to invest Rs. 5,000 each month in a mutual fund that focuses on the technology sector. Over the next 10 years, the technology sector experiences exponential growth due to advancements in artificial intelligence and the rise of tech startups.
By the time Ravi reaches his 35s, his investment has grown significantly, providing him with a sizable corpus that can be used for various purposes like buying a house, starting a business, or funding his retirement.
India boasts of a young workforce, with a significant percentage of its population in their 20s. This demographic dividend creates a favourable environment for economic growth and investment opportunities.
With a young and dynamic workforce, the country has the potential for innovation and entrepreneurship, leading to the emergence of new businesses and industries. Investing at a young age allows you to tap into this demographic dividend and benefit from the country's rapid economic growth.
Access to government initiatives
The Indian government has implemented several initiatives to attract both domestic and foreign investors. Programs like ‘Make in India, ‘Digital India,’ and ‘Startup India’ aim to facilitate business growth, create employment opportunities, and foster a favourable investment ecosystem.
By investing in your 20s, you can leverage these government initiatives and benefit from the supportive business environment.
Scope and time for diversification
Early investment provides an opportunity for diversification in your investment portfolio. With a diverse economy and a wide range of sectors to choose from, you can spread your investments across different industries, reducing the risk associated with putting all your eggs in one basket.
For instance, if one sector underperforms, the gains from another sector can help offset the losses. This diversification strategy helps in managing risk and ensures a more stable and secure investment portfolio.
In conclusion, investing early can be a game-changer as it allows you to gain a significant advantage in terms of time and the potential for long-term growth.
Whether you choose to invest in stocks, mutual funds, real estate, or startups, taking advantage of the opportunities in the market at a young age can set the stage for financial success in the future.