The benefits of investing at an early age in the stock market are many. Most of the surveys show that the earlier you invest, the richer you get. So, investing in your 20s can lay a foundation for a secure future. Read more to know why!
If you start investing at an early age of life, you can develop a lifelong habit of saving and investing. Therefore, you will have financial independence and become more disciplined about money. Most importantly, you will learn the magical concept of Compound Interest.
So, never think that young age is a barrier to entering in the stock market. Actually, you are never too young to invest. The truth is – the small amount of money invested now, will put much more in your pocket in the coming future.
But, if you’re sitting there and thinking, “I have no investments, and it’s too late to start now”. So, you’re wrong. It’s never too late to start investing in the share market but it’s always better to start early.
Here are 5 fundamental reasons that why you should start investing as early as possible.
Risk-taking ability improves
In early investments, your investment gets more time to grow in value. Studies show that young investors have a more risk-taking ability.
Typically, the stock market is always volatile. If you start to invest early, you will have more time to prepare yourself. Also, you can make up for the loss of investment with time, if any.
So, the probability of earning a handful returns at a young age gets enhances with high risk-taking ability.
The opportunity of compound interest
Compound interest means simply – interest on interest. Continuous reinvesting of your earnings can exponentially increase your return on investment. Wise investors understand the benefits of investing early and do not miss the advantage of the potential gains from compound interest.
Here’s a refresher from Investopedia to understand how time and compound interest are related. Let’s have look.
Spending habits will improve and save more
Investing at an early age, develop disciplined spending habits. Automatically, it teaches important lessons about budgeting, spending, and saving.
We all know that the more you invest, the more you get in return. So, people who practice investing early are less likely to overspend or be careless with their money in the long run.
Therefore, gradually it will develop a habit of saving more by cutting on unnecessary expenses and divert such savings toward investment.
To make the balance with inflation
Nowadays, inflation is a sustained increase in the price level of goods and services where the value of purchasing power of money is decreasing.
If you invest in the stock of a renowned company, you can easily earn a return of between 10-15% depending on how good the stock is and how much time you invested in the selected stock.
Therefore, investment in the stock market is helping to grow your money fast enough to outpace inflation.
Support your retirement plans
You must agree with me that start saving for retirement from the age of 20s is the better idea than the age of 40s.
Life after retirement is more challenging than it has ever been, so planning for retirement now will lead to a happier life after retirement. So, investing at an early enhance the probability of reaching financial stability at a young age.
So, the earlier you start, the easier it is to build wealth. Obviously, you will face a few difficulties in investing at an early age. But we all live in a tech-savvy world. There are many platforms around you to learn and know which investment is best for you. Most importantly, an investment with self-research always gives you confidence. It will help you take more bold decisions in the future life.
One of the greatest investors of all time, Warren Buffet started investing at an age of eleven.
Eleven might be a little soon for an average investor. But, if we decide to start investing early, then the 20s is most suitable to enter in the stock market. Usually, most of the people have money with fewer responsibilities in this age group.
So, don’t fall into the I-need-a-lump-sum-of-cash-to-start-investing trap. Start investing in smaller amounts. You need to give time to your money to mature. Investing at an early age is the best decision one can take in his or her life.
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