There is no defined answer for the question “When to start investing”. Only correct answer for this question is “As early as possible”. You should not under-estimate the power of compounding mathematics. Before that you should know when and how to invest in stocks.
Few of the Most Popular Pros and Cons of Investment Ages are:
1. When you plan to investment early in your young age (between 20-30 Age), You can aim toward higher risk tolerance capacity for higher returns.
2. More you delay your investment plan (between 30-40 Age) you will require more investing capital to achieve the financial targets.
3. If you fail to develop your investment road map at early age then it is more likely that you will fail to build investment road map at later age.
Strategy to Invest in Stocks:
Let us take an example of compounding interest to understand better. Suppose you have drafted your diversified investment plan about how you wish to invest in stocks as below with expected returns as 17% year after year. Let’s observe how returns would differ with the age of investment.
| Stocks | Category | Sector | Allocation | Expected Returns |
| Sun Pharmaceutical Ltd. | Stock | Pharma | 40% | 25% |
| Asian Paints Ltd. | Stock | Consumer goods | 20% | 20% |
| Infosys Ltd. | Stock | I.T. | 20% | 15% |
| Government Bonds | Fixed Income | Bonds / Debts | 20% | 9% |
| Average Expected Returns per annum: | 17% | |||
Example-1: Assuming that you have plan to invest in stocks Rs.10,00,000/- (around $15,000) at the age of 25 years. You plan to retire at the age of 55 years, which means you will stay invested for next 30 years without any additional investment contribution. Concluding compounding interest of 17% year on year for 30 years, you will receive Rs.11,10,64,650/- (around $16,65,970) amount of cash for your retirement which seems to be very good.
Example-2: Assuming that you have plan to invest in stocks Rs.10,00,000/- (around $15,000) at the age of 45 years. You plan to retire at the age of 55 years without any further investment plans, which means you will stay invested for next 10 years. Compounding interest of 17% year on year for 10 years will result you Rs.48,06,828/- (around $72,102) amount of cash for your retirement which does not look attractive at all.
Conclusion:
To be a smart investor, you need to implement your investment plans as earlier as you can which will not only facilitate with the large amount for your retirement but also it will allow you to retire at early age with peaceful mind.
- Tutorial Course - Basics of Investing for Beginners -
» e-Learning Chapter 1: What is Investment and its objectives.
» e-Learning Chapter 2: Why is Investment important for Economic growth.
» e-Learning Chapter 3: Ways to Invest your money and make profit.
» e-Learning Chapter 4: What are the Best Investment Opportunities for your Retirement Income.
» e-Learning Chapter 5: What are the Legal Matters you should know before Investing.
» e-Learning Chapter 6: Different Types of Investment Risks Involved in Investing.
» Currently Reading: When and How to Invest in Stocks.
» e-Learning Chapter 8: How Positive Attitude can improve your Investing mindset.
» e-Learning Chapter 9: Should you Borrow Money to Invest in Stock Markets or Funds.
» e-Learning Chapter 10: 5 Rules of Thumb: Key points to be consider before making Investments.
» e-Learning Chapter 11: How to Calculate Stock Market Returns, Break Even Point and Basis Point.
» e-Learning Chapter 12: How to Calculate Compound Interest and Simple Interest.
» e-Learning Chapter 13: Rule of 72, 114 and 144 of Compounding Interest formula.
» e-Learning Chapter 14: What is the Difference between Trading, Investment and Speculation?
» e-Learning Chapter 15: How to become a Smart Investor or a Successful Investor.
» e-Learning Chapter 16: Tutorial Quiz – Basics of Investing for Beginners Module.