All of you must have heard about the age-old saying: Early to bed, Early to rise, makes one healthy, wealthy and wise. Being early is always good in all aspects. Stepping out early pout of home for catching a flight is much better than rushing on the road. Starting soon will bring in the much-needed peace of mind.
There is nothing different in the case of Systematic Investment Plans or SIPs. If you start your SIPs early then, you will enjoy a lot of benefits. You will get much time to save as well as invest in your goals and targets. Starting early will enable you to accomplish your goals, but the amount of investment will be lesser.
Another advantage of being early with SIPs is that you tend to start saving at a much younger age. With the passage of time, the habit of saving will get more deep-rooted. You will soon become a star saver and super investor. The third advantage is that you can invest more when you are younger. This is so because you have fewer responsibilities at that age.
Now we will give you an illustration of how starting early with SIPs will help you to earn more by investing less. For instance, if you want to save Rs 1 crore for any of your long term goals, like retirement, then you can start investing at the young age of 25. You have whopping 35 years in hand before turning 60. You can invest in a SIP, and the amount will be around Rs 1540 per month in an equity fund. We are assuming that the fund will give you returns at the rate of 12% per annum. If you begin with your investments at the age of 35, then you have 25 years in hand before turning 60. Now the SIP will be of around Rs 5270. Thus you can see that starting early with SIPs help you to achieve your goal by investing a lesser amount. Also, starting early helps you to accomplish your goals faster. So you are left with more time to think of and invest in aspirational goals and activities.
If you begin early with SIPs, then you will be able to earn more profit because of compounding. Suppose you are 25 and you start investing Rs 10,000 every month. Also, make sure you increase your SIP contribution every year by just 10%. When you retire, by then you will have accumulated a whopping amount of Rs 14.82 crores. On the contrary, if you begin this from the age of 35 years, you will have a sum of just Rs 3.70 Crore at retirement. In the first case, the original investment was only Rs 3.25 Crore and the return generated was Rs 11.57 crore. But if you consider the second case, the original amount invested was Rs 1.18 crore. But the profit generated is Rs 2.52 crore.
So if you are still young and want to do something big in life, then start investing in SIPs NOW!