Why Invest: 5 Important Reasons to Start Investing?

Byfinmoneydesk
October 8, 2023

When to Invest

The best time to invest was yesterday. The next best time is now. As we already know the reasons behind starting your investing journey, it is time to know the next big question: when to Invest?

Table of Contents

The right time for investing?

The answer to this question is “Right Now”. This means the right time to start investing is as soon as possible and as maximum as you can. You should start investing right from the time you receive your first earnings.

Upon initial reading, it may seem simple to start your investment journey as soon as you begin earning. This is not true in real life, your financial obligations, play a huge role in making the decision to start your investment journey. If an individual has numerous financial obligations to fulfill, it may be impossible for them to commence investing immediately after receiving their first paycheck. Therefore, it is advisable to prioritize clearing old debts before starting to invest.

Start Early, Start Small

One need not begin their road towards investing only when they have a sizable sum of money saved up to do so; one can start by investing little amounts as well. You must get started investing as soon as you can on your trip. Let’s examine this with an illustration:

Case 1: A 25-year-old person wants to retire at 50 years of age, he started his investment journey by investing 25000 in a scheme that offers a 12% return. When he retires 25 years from now, he will end up accumulating ₹4.74 crores approximately.

Case 2: A 35-year-old person wants to retire at 50 years of age, he started his investment journey by investing 40000 in a scheme that offers a 12% return. When he retires 15 years from now, he will end up accumulating ₹2.02 crores approximately.

Comparing both cases, we can see that even after increasing the investment amount, the final corpus for Case 2 is low as compared to Case 1. So, why does Case 1 have the advantage here? Simply because they started investing earlier than Case 2.

So, when to invest?

To invest over a longer period, it is advised to start investing as soon as feasible. To begin your investment journey and to attain important life goals that are on your future to-do list, invest little sums consistently throughout your working years. You can simply invest a larger percentage of your income once your debts are paid off.

Best condition for investment

When the price of any stock is low, it is the best time to buy it and start investing. It is risky to purchase a stock while it is at its all-time high since the price may fall after you do investment, leaving you with significant losses. Additionally, there is a better probability that the price of the stock rise more after you invest in it, leaving you with substantial winnings.

How to invest?

Investing your money depends on multiple factors like your income, life goals, and financial obligations among many things.

Let’s explore some points for the same:

Align investments with goals : Before embarking on your investment journey, it is important to consider your financial goals. Take time to make your goal timeline broadly and classify them as short-term or long-term goals. This will provide you with a clearer understanding and help you better plan your investment strategy.

Then choose your investment options accordingly.

Invest according to your risk tolerance : Your risk-taking ability is a really good metric to determine the investment options that are right for you. Analyze your risk tolerance and then move on to your investment journey. For conservative, risk-averse investors, it is good to invest your money in government-funded schemes and fixed deposits. For investors who can take a very little insignificant risk, the best bet is to invest your finances in mutual funds. For risk-taking investors who wants higher return on their investment, it is good to invest your money in equities and commodities.

Diversification : It is highly advisable to invest your money in different investment options and by this means diversify your investment portfolio. So if one investment does not perform well and you lose all your capital by investing in a single option, investing in multiple options can secure your capital, because the combination of all options can compensate for the loss in one option.

“Don’t put all your eggs in one basket.” This proverb holds true when it comes to investments.

One way to achieve diversification is to include different types of investment options and invest in different sectors for example, in equity investment, you can include sectors such as FMCG, Healthcare, Banking, and IT. By diversification across various industries, you can hugely reduce the risk of losing your entire capital.

Summing up

So, that concludes our discussion on when and how to invest your money. Next, let’s explore where to invest.

Basic Finance English Financial Planning Investment

finmoneydesk

Disclaimer:This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.