When Should I Start Investing?
Today, When it comes to investing, your most powerful tool is time.You will be in for a pleasant surprise if you start investing early. This is possible because time and compounding interests play a vital role in building wealth over time. Time and compounding interest form a magic combination that can help you grow your wealth exponentially over a longer horizon.
How Does Compounding Grow Your Wealth?
Consider two friends Rohan and Vivek, both 30 years of age.
- Rohan invests Rs. 3,000 monthly towards his retirement. His investments provide him with a 10% annual return on investment and he succeeds in accumulating little over Rs. 68 lakhs at the end of 30 years.
- Vivek, however, sits idle for 20 years and then suddenly wakes up 10 years before his retirement. He starts investing Rs. 15,000 every month for the next 10
- Vivek too manages to pocket an annual return of 10% on his investment. However, at the end of 10 years, he manages to accumulate only around Rs. 31 lakhs for his retirement.
How is it possible? Rohan was investing merely Rs. 3,000 every month whereas Vivek was investing Rs. 15,000.Well, it is possible due to the compounding interest and time, which has the power to multiply your money over a long period.
Thus, if you invest in a disciplined manner and give your investments plenty of time to grow, you can achieve most of your goals without much pain.All thanks to ‘Power of Compounding.’
Starting Small is Okay
Sometimes people delay investing until they have a significant amount of money. But this also means they give up years of compound growth. No matter how small the amount is, get your money working for you as soon as possible.This question, “How do I start investing with little money?”, shouldn’t bother if you want to secure your future.
Consider the previous example of Rs. 3,000 invested by Rohan when he was 30 years old. Pretend for a moment, he didn’t have Rs. 3,000 to invest at age 25. But he did have Rs. 1,800. If he invested Rs. 1,800 starting from the age 25, he would have almost Rs. 68 lakhs at retirement age. Almost the same amount that he accumulated by investing Rs. 3000 per month starting from the age 30.
Unit Linked Insurance Plans (ULIPs) for All Investment Needs
ULIPs are life insurance plans which are more vested towards investment objectives. With the help of ULIP investments, you can not only invest in the goal but also ensure that your family can achieve the goal even if anything happens to you.
More than that, ULIP investments can help you a lot of tax over time. As ULIP investments qualify for deduction under section 80C, investments up to Rs. 150,000 (as per tax laws for A.Y. 2019-20) subject to fulfilling conditions therein can reduce your tax liability for the financial year.
Also, as per the prevailing tax laws (lat. A.Y. 2019-20) any returns on the invested money are not taxable in ULIPs. You can withdraw partially after five years of investment without incurring any tax liability subject to fulfilling conditions therein. However, if you want to adjust the investment risk of your ULIP investment, you can do so without withdrawing money.
ULIPs are quite flexible in the way investors belonging to any risk category can invest in them for a very long period.