When Should You Start Investing in Mutual Funds?
Mutual funds are professionally managed investments wherein money is pooled from investors with an objective to invest in stocks, bonds, or other assets. A Systematic Investment Plan (SIP) is a great way of investing in mutual funds. An SIP investment doesn’t require a lump sum amount and it helps you spread your investment over a long duration. While it’s true that an SIP investment can help you achieve your financial goals, a large number of individuals are confused as to when should they start investing in mutual funds. Below is a guide on when to start mutual fund investment for generating wealth and maximising return potential.
Invest early to reap maximum benefits
The earlier you start investing, the more you will benefit from the power of compounding. Compounding means earning returns from existing returns. If you start SIP mutual funds at a young age, you will be able to generate a bigger corpus through your investment. Also, at a younger age, you may have fewer financial responsibilities and a higher risk appetite. Therefore, you can consider investing in equity mutual funds to obtain better returns.
Here are a few more advantages of starting a mutual fund investment at an early age:
Adds financial discipline
A major benefit of investing early is that it can make you financially organized. With a mutual fund SIP, you would be required to set aside a fixed amount at regular intervals, and this will inculcate financial discipline in your life.
Make sure that you evaluate your financial goals before starting an SIP investment. Be it buying a house or car, saving for wedding, or an exotic holiday, investing in mutual funds can help you realize financial goals with ease. Additionally, in case you need urgent money to meet unavoidable expenses, the SIP investment can prove to be extremely handy and help you sail through the tough times without being financially strained.
More recovery time
With early investments, your money gets more time to grow. If your investment incurs a loss, you will have more time to make up for the loss. Whereas, individuals who start investing at a later stage in life, will get comparatively lesser time to recover their losses.
Support your retirement plan
It would be ideal to start investing in mutual funds in your 20s at the beginning of your career. You can also consider saving for retirement from a young age. Life after retirement can be challenging if you don’t plan for it wisely. So, planning for retirement at an early age will lead to happier post-retirement life.
Now that you are well aware of the benefits of investing early in mutual funds, ensure to make the most of it by starting an SIP investment at the earliest. Do not forget to research the market carefully before investing. Evaluate your risk appetite and make an investment that is likely to offer decent returns in the long run. An investment with self-research will boost your confidence and help you make wise decisions in the future. However, in case of any query, do not hesitate to seek the help of a financial advisor to make a well-informed decision.