Stuthi started her first job at the age of 22 with a salary of Rs. 22,000 per month. She is a big-time foodie and likes to party every weekend. A Whopper from Burger King, costing Rs. 279, is her fixed food for every Friday night. Plus, she spends approximately Rs. 500 every other weekend on ‘parties.’
When asked why she doesn’t invest a small portion of her salary, she says that she doesn’t earn enough to invest, and no money is left with her at the end of the month.
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Now, Stuthi is 30, earning Rs. 70,000 a month, but she still says that no money is left with her at the end of the month.
But now she wants to buy a laptop with a heavy graphics card but can’t because she never understood the value of investing or the discipline of investing. From her first job, Stuthi could’ve easily saved at least Rs. 1000 every month, which was enough for the start of her investment journey.
When transitioning from a student to a working professional, we do everything with our hard-earned money but never invest it. We only understand the importance of investing when friends or family force us to, when we are knee-deep in debt, or when we can hardly make ends meet even with a good salary.
Investment is one thing that people want to do but fear the most because they think they are putting their money at risk. But starting even with as little as Rs. 500 every month can build a heavy portfolio.
Also Read: How Much Tax You Pay For Your Investments
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Savings Vs. Investment
You might save money and keep it in your bank account, but do you know it depreciates daily?
But saving and investing are two different things. Why? Let’s understand!
We all know that inflation is around 6% per year on average. Hence, the Rs. 100 you have today in your account will be equal to Rs. 94 a year later.
Now think about the money kept in your bank account, which claims to give you an interest rate of 2% per annum. But, technically, you are losing 4% (6-2) every year by keeping money in a bank account. That is why investing the money you are saving is important.
But the biggest question again comes revolving around: where to invest? How do I invest? When to invest?
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You can start investing any time you want. But if you’re unsure, start investing the day you start earning. Set aside at least 10% of your income and invest it, forgetting for at least 20 years about the existence of that money.
Shedding light on the value of early investing, Anish Agarwal, Founder of RJ Wealth Creators, a personal financial planner, says, “The majority of people’s income is spent on food, travel, clothing, phones, and technology. Your goals are like fruits, and investing is like planting a tree. Everyone wants to fulfil their goals (fruits), but they constantly debate when to do it. However, the tree must grow for a specific amount of time before bearing fruit. Therefore, starting is always a good idea, and starting as soon as possible is preferable. Investing is similar to growing Chinese bamboo in that you might not notice anything for the first six months, but then it starts to develop and can reach heights up to 10 feet long. The lesson to be learned from this is that it takes time and patience to reach our goals.”
Also Read; How A Lost iPhone Led To Warren Buffett Investing Billions In Apple
Here Are The Benefits Of Investing Right From Your First Job:
Retire Early: Have you ever planned your retirement? No? Hear this out:
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Starting investments at the age of 24–25 with just 10% of your salary can build you a good portfolio.
For example, if you are 24 and your monthly salary is Rs. 20,000, 5% comes to Rs. 1000 monthly. You are now investing it for 25 years.
Now you are 49 and still investing. The total amount invested by you in these 25 years is Rs. 1000 x 12 months x 25 years = Rs. 3 lakhs.
But, assuming a 9% annualised return, the amount you will get after 25 years will be around Rs. 11 lakhs, which is around eight lakhs more than what you had invested. This is the power of compounding (The returns generated from every investment get reinvested automatically).
You can see how, just by investing a small portion of your salary, you can turn your money into this much.
Now, you know for sure that you won’t be earning only Rs. 20,000 a month for a lifetime; you will definitely get multiple increments. Hence, investing at least 10% of your income can bring you good fortune because, with investing, the power of compounding also does its job.
You Can Make Mistakes Without Any Worries: The best part of investing is that it is fun and should only be done that way. But it is possible only when you start very early. It won’t hurt you and your pocket if you face a loss of Rs. 500–1000 while investing, but it will definitely hurt you and your pocket deeply if you face a loss of Rs. 20,000–Rs. 30,000.
At an early stage, due to enthusiasm and less money, investment avenues make you eager to invest in different areas, explore, and learn rather than thinking about just returns.
Talking particularly about the stock market, it really requires a certain level of knowledge and experience to gain returns from it. You cannot just put money in XYZ stocks and expect returns from them. Fundamental and technical analysis are done before investing in a particular stock.
Also Read: How To Invest In Real Estate ‘Without’ Actually Buying A Property
There Are Some Disadvantages Of Investing Also:
Risk is an inevitable part of the investment journey. You have to take the risk of the market when investing. It is not like you will lose all your money, but sometimes you might lose a few bucks. Here, patience is the key.
You would think that the money in your bank account is safe. But it is not. In an economic crisis, the banks are the first ones to fail, and in the case of a bank’s failure, they are liable for only Rs. 5 lakhs of your amount in the bank. The SVB banking crisis is a live example of the same.
So, why not invest the money rather than keep it in the bank?
Fewer Parties: You will not be able to party much because, apart from the spending on necessities, the rest goes into investment (during the beginning years of your career); hence, fewer parties. This habit can bring discipline, though.
You do not have to start investing in stocks or mutual funds; money spent on self-help books is also an investment. You are investing in yourself by doing so and increasing your worth. Add skills to your CV and those extra zeros in your salary within a short time.
Here Are Five Ways To Be Better Prepared For The Journey
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Establish A Financial Plan: Create a budget analysis of your income, expenses, and future goals. Then, create an investment plan that will help you reach those goals.
Advance Tax Planning: Start SIPs in ELSS (Tax-saving) funds or choose Public Provident Funds (PPF) for your tax planning in advance. It should be a year-round activity in accordance with your financial goals and plan.
Identify Your Insurance Needs: Insurance policies should not be viewed solely as tax-saving tools; they are designed to meet fundamental healthcare needs. Choose accordingly.
Check Your Asset Allocation And Rebalance: Your liquidity needs, risk tolerance, time horizon, and other factors will determine the best mix of equity, debt, gold, real estate, and other assets. Therefore, evaluate your portfolio and adjust it as necessary.
Increase Your Monthly Investment: You should, ideally, increase your SIP by 10% annually. You’ll accomplish your financial objectives quicker as a result.
Take A Family Financial Planner’s Assistance: Speak with a financial planner about your investment needs, and they will help you choose the best course of action.
Avoid depending solely on online investment platforms: They use advertising to attract customers. However, they might not be accessible when you need them the most because most operate through a customer care-based system.
Explaining why a financial planner is better than online investment platforms, Anish Agarwal, Founder of RJ Wealth Creators, says, “Although they may have a glamorous appearance, online investment platforms may not offer you the assistance you require. For instance, if you bought a term plan, your family would use it, not you. Therefore, an online company won’t be there for your family after your departure; customer care will. They will assist you, but only in accordance with the established company policies. A financial advisor will assist you and complete the process in these circumstances. A financial planner is similar to a family doctor in that they are familiar with your lifestyle and all aspects of it, which enables them to offer you advice more effectively and to the root of the problem.”
But it is best to learn how to invest; it is the best thing you can do for yourself and save yourself from the 1-2% commission of these planners. Constant research is the key to tracking what’s happening in the market and choosing the best avenues for investment.
According to estimates, only 3% of Indian households actively invest in the stock market, as per Paytm’s DRHP. This indicates the low level of financial literacy in India and the increasing need for young generations to start their investment journey as soon as possible.
All in all, the start of an investment journey is an opportunity to reflect on the past and set goals for the future.
Also Read: Want To Invest? 15 Books Recommended By Billionaire Warren Buffett
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