Investing your money to make it even while you have taken a break is better than just letting it sit in the bank. Even though many people strongly support investing, they are unsure of where to begin.
You can invest in a wide range of assets, such as equities, bonds, mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs), stock market, and more.
Depending on the ultimate result you want to achieve or the profit you want to generate, you can make short-term or longer-term investments. The basic objective of investing is to build up a larger pool of assets you can withdraw whenever you choose and use for other things. For instance, you could invest in real estate now to raise the price at which you sell it in five years.
Let’s get to know how to start investing early!
Here is an example. A, B, and C are three investors. At age 18, Investor A makes a Rs 1 lakh investment. Investor B did at 24, and Investor C at 30 years. They anticipate 15% returns when they retire at the age of 60. They anticipate 15% returns when they retire at the age of 60.
By the time Investor C reaches age 60, the Rs 1 lakh he invested when he was 30 has grown to Rs 66 lakh. Investor B increases his investments by 150 times to reach Rs 1.5 crore. Investor A who started investing when he was 18, saw his money rise to Rs. 3.5 crore (350 times). That is how compounding works. Thus, the power of compounding aids in the gradual growth of your wealth.
Investor A increases his money by nearly 350 times simply by starting early compared to 66 times for Investor C.
Let us have a look at monthly investments! By investing Rs 1,000 each month, Investor A will have Rs. 4.2 crore by the time they are 60. Investor C will have 70 lakh, while Investor B will have Rs 1.7 crore. So the best thing an investor can do to improve long-term wealth growth is to start investing early.
The majority of investors today usually begin after the age of 30. But by starting early and educating yourself about the effects of your investments, you can generate more significant long-term wealth.
How much do you need to invest in a mutual fund?
Understanding which investing strategy to use based on your risk tolerance and time horizon for making investments is essential for achieving good returns. You can consider the three main short-term, medium-term, and long-term categories as the first step in choosing the best investment strategy or SIP investment plan.
After you know your time horizon, you can select the best investment possibilities from the three categories. You can begin by investing Rs 3000 or Rs 5000 for a monthly SIP policy, gradually expanding over the months and years. It would be an excellent future investment where if you need, you can take it out to invest that money in buying something big or keep continuing the same for a few more years.
Mutual funds, where a professional investor manages the investment, are the simplest method to start investing. The best part is that mutual funds are available in a wide range of sizes and shapes, so you can almost likely find one that invests in the kinds of assets you think are ideal for you, given your risk tolerance and time horizon. Pension plans and other investment options, such as bank fixed deposits, may benefit you.
Long-term financial goals are those that you want to accomplish in 7-10 years. Equity Mutual Funds, Real Estate, Gold, NPS, ULIPs, and Small Saving Schemes are the best investment plans for the long term.
Medium-term goals are those that require an investment of three to five years or less. For these reasons, you should invest in something that can significantly surpass inflation while also not being extremely volatile. National Savings Certificates (NSC), Post Office Time Deposit, Debt Funds (medium term), and Hybrid funds are the best investment plans for the medium term.
While making short-term goals, minimising risk and having quick access to your money (also known as liquidity) are the important considerations. Bank Fixed Deposits and Debt Funds (short-term) are the best investment plans for the short term.
To summarise, ensure to invest in an adequate mutual fund early in your life, but before that, understand how much you need to invest per month to benefit in the long run!
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