Top Reasons Why you Should Start Investing as Early as Possible

Ask any expert in finance about when you should start investing, and it's quite likely that the answer will be this –
"You should start investing as early as possible."

In fact, every beginner-friendly investment course or video out there echoes this advice. And it's solid advice too, because you should start investing as early as you can.

But have you ever wondered about why you need to do this? What is the real reason behind getting started on your investment journey in life? And how can it benefit you in the long run? Well, if these are the questions you have today, we bring you all the answers.

And as always, let's get right into the thick of things.

The magic of compounding is an open secret in the world of investments and finance. Everybody knows that it helps money grow exponentially, but few ever take advantage of it in the right manner. We'll help you do that, but first, let's see what compounding is, and how it works best if you start investing early.

Compounding is the process by which the interest you earn on your principal also earns some interest. In other words, you earn interest on your interest. This helps the overall value of your investment increase exponentially over time.
Here's a very basic example to show you the difference between simple interest and compound interest.

Particulars	Simple interest	Compound interest
Initial principal	Rs. 1,00,000	Rs. 1,00,000
Rate of interest	5%	5%
Interest for year 1	Rs. 5,000 (Rs. 1,00,000 x 5%)	Rs. 5,000 (Rs. 1,00,000 x 5%)
Total investment value at the end of year 1	Rs. 1,05,000 (Rs. 1,00,000 + Rs. 5,000)	Rs. 1,05,000 (Rs. 1,00,000 + Rs. 5,000)
Interest for year 2	Rs. 5,000 (Rs. 1,00,000 x 5%)	Rs. 5,250 (Rs. 1,05,000 x 5%)
Total investment value at the end of year 2	Rs. 1,10,000 (Rs. 1,05,000 + Rs. 5,000)	Rs. 1,10,250 (Rs. 1,05,000 + Rs. 5,250)
Interest for year 3	Rs. 5,000 (Rs. 1,00,000 x 5%)	Rs. 5,512.50 (Rs. 1,10,250 x 5%)
Total investment value at the end of year 2	Rs. 1,15,000 (Rs. 1,10,000 + Rs. 5,000)	Rs. 1,15,762.50 (Rs. 1,10,250 + Rs. 5,512.50)

So, you see how the rise in the value of investment is higher each year in the case of compound interest? Now, let's see how compound interest works best if you start investing early.

Let's take a look at 5 people, all of whom wish to retire at 55 years of age. We'll call them A, B, C, D and E.

• Person A, being quite late to the party, starts investing only at the age of 45.
• Person B begins his journey five years before person A, at the age of 40.
• And so it goes, with person E, being the smartest of all, starting his investment journey at the age of 25 years itself.
• Each of them invests Rs. 10,000 per month, for the entire investment period.

Let's see how their money grows over that time.

Person	A	B	C	D	E
Age at the time of the first SIP investment	45 years	40 years	35 years	30 years	25 years
Retirement age	55 years	55 years	55 years	55 years	55 years
Investment tenure	10 years	15 years	20 years	25 years	30 years
Total amount invested (INR)	12,00,000	18,00,000	24,00,000	30,00,000	36,00,000
Rate of interest	8%	8%	8%	8%	8%
Final investment amount (INR)	18,41,657	34,83,451	59,29,472	95,73,666	1,50,02,952
Growth ratio	1.53	1.93	2.47	3.19	4.16

As you can see, person A's investment grows just 1.53 times over the course of 10 years. But person E's investment grows 4.16 times because of early investment, thereby giving the initial capital more time to grow. That's because the longer your investment, the better compounding works. And that's truly the best way to create wealth over time.

This three-step checklist will help you make the most of the magic of compounding.

• Start investing early.
• Remain invested for a long period.
• Be consistent with your investments.

The magic of compounding is one of the key reasons to invest as early as you can. But starting your investment journey earlier in life also gives you many other advantages. Check them out below.

More time to recover losses
Investing early gives you the opportunity to recover any losses you may make early on in your investment journey. For example, if you start investing at 21 years and make a massive loss when you are 25, you have around 30+ years ahead of you till retirement. That gives you ample time to recover your losses.

Lower investment costs
In some cases, investing early can also bring down the cost of investment significantly. Life insurance plans are an excellent example for this. The younger you are when you buy a life cover, the lower your premiums are likely to be. You can take advantage of this and invest in a term insurance plan like the ABSLI DigiShield Plan or take greater risk and invest in a ULIP i.e. ABSLI Wealth Assure Plus at a younger age, so you get the double advantage of an affordable premium coupled with a life cover and investment benefits.

Better risk taking ability
When you are younger, your risk appetite also tends to be on the upper end of the spectrum. This leaves you in a better position to invest in high-risk options like stocks or equity mutual funds, which also have the potential to offer higher, inflation-beating returns. If you start investing much later in life, you may find yourself gravitating towards safer investment options like debt instruments, which offer lower returns.

Option to retire earlier
Starting your investment journey also allows you to retire earlier in life, if you want to. This is because you may have accumulated enough wealth by the age of 50 or so, and you may no longer find it necessary to keep working to earn for your daily needs or for your life goals. This luxury may not be attainable if you start investing later in life.

You don’t need a lot of money to start investing early in life. In fact, even an amount as small as Rs. 500, when invested consistently, can go a long way over the years. Wonder how that would work? We have a blog that gives you the finer details of how small amounts can help build a large corpus.

It’s no secret that the younger you are when you get your life cover, the lower your premiums will be. So, why not get your life cover as early as you can? The ABSLI Assured Savings Plan (UIN: 109N134V02) allows you to get your life insurance coverage with flexibility of multiple payment terms.
In addition to that, this savings plan also gives you the benefit of guaranteed maturity or death benefits, the option to include your spouse under the policy, as well as a wide range of additional riders to enhance the protection you enjoy.

All things considered, there are many advantages that you get to experience if you invest at a younger age. The best part is that you don't even need much to get started. There are SIPs where you can invest as little as Rs. 500 or Rs. 1,000 per month. As you grow older, you can increase your investment amount accordingly.

So, if you haven't begun investing yet, there’s no time better than now. As they say, the best time to start investing was yesterday. The second best time is now.