Key Consequences of Delayed Investments
By Akhil Chugh
Date February 12, 2023
कल करे सो आज कर, आज करै सो अब | – Sant Kabir
Usually, we often tend to delay investing even in the absence of any strong reasons. And we do happily think that how a few months would not matter much. But the reality is that even small delays can greatly impact your wealth in the long term.
The secret to being Wealthy is not always making big decisions but also making small decisions like not delaying your investments and starting right now. A few years delay in making your first investment can cause a crore worth of harm to your financial status.
The longer you delay investing, the more money it will cost you. Surprisingly, people think the cost of delaying investing is not as significant of a figure as it truly is.
As is clear from the illustration below, how a 5-year delay in SIP can cost you around Rs 15 crores & a 10-year delay can cost you around Rs 23 crores!
The cost of delay in investing is enormous. Even one year can make a huge difference.
“Now” is the best time to begin investing for your long-term goals.
Impact of delayed investments on wealth creation:
Becoming wealthy is a journey and investments are the highways to it. If those investments are delayed due to any reason, our dreams of financial independence will take too long to come true.
Let’s take a look at what happens to wealth creation when the investments are delayed.
Thus, the cost of delayed investments increases with each passing year!
If you start investing early, you don’t need to earn eye-popping rates of returns to accumulate big sums of money. All you need is ‘Time’. When you start investing early, your money has more time to grow due to the magic of compounding.
Start investing today & let the magic of compounding work to help you reach your financial goals!
Key consequences of delayed investments:
1. Lower wealth creation:
Investments grow over time. When one starts investing early, one gets a considerable head start over others in similar situations who start late. Compound interest was referred to by Einstein as the eighth wonder of the world and rightly so. Just like investing early gives a head start, it also brings with itself the wonderous compounding effect.
Let’s look at the illustration to understand it better.
Considering the 12% CAGR returns, at the retirement age of 60 years, an investor who started his SIP of Rs 50,000 at the age of 30 years will be able to accumulate Rs 18 crores while another investor who started his SIP of the same amount 10 years later will only be able to accumulate Rs 5 crores.
This is the magic of compounding. In the investment world, time is your biggest friend. Time creates money. The earlier you start, the easier it is!
2. Comparatively higher investments:
Delay in investment could cause lower returns as you lose on the magic of compounding. So, if you start late you have to invest a larger sum of money to achieve your financial goals.
Let’s understand it with the help of the above example only. If an investor’s retirement goal is to accumulate Rs 18 crore to lead a comfortable retirement life then he has to invest Rs 50,000 per month to reach his desired corpus in 30 years.
To earn the same amount in 20 years, an investor has to invest a monthly SIP of Rs 1,80,000!
3. Risk appetite & its implications:
Generally, you have a higher risk appetite at a young age when you have a longer period to stay invested as there are fewer responsibilities. With time, your responsibilities also grow like providing for your family, paying for loans, education, household bills, and expenses. Thus, impacting financial planning in the future. So, it is recommended to invest at a young age so that the returns could be higher at the time of requirements.
4. Investing vs saving benefits:
It’s good to save money but investing your savings is a prerequisite to creating wealth in the long run. Saving money in bank accounts only gives a meagre percentage of interest while equity investments via mutual funds have the potential to deliver higher inflation-beating returns in the long run. Investing money is far better than holding it in savings accounts.
Key Takeaways from Net Brokers:
- ‘Start early to earn more. It is very important to understand the basic rule of investing that ‘time in the market’ is more important than ‘timing the market.’ The later you start, the lesser time you will give your investments to compound, resulting in lower wealth creation.
- Delay in investing can be costly. So, if you are still unsure about investing, avoid making lump sum investments and go for investment in equity mutual funds via monthly SIPs. SIPs help you to average out the cost of investing while ensuring that investors don’t miss out on any good investment opportunity when the market is favorable.
- The secret to being Wealthy is not always making big decisions but also making small decisions like not delaying your SIP and starting right now.
- Net Brokers strongly believe that investing money is far better than holding it in savings accounts. One cannot expect the return from a savings bank account to beat the widespread inflation. Investing in instruments like mutual funds suited to investor’s risk profile and financial goals has a greater chance of beating inflation.
Most young people tend to think that they have “enough time to invest in the future” and delay their investment process. Waiting for the right time to start your mutual fund investments can make investors miss out on the power of compounding.
Starting Early is very important for creating significant wealth in the long term. The cost of delay will hamper your wealth & financial goals over the longer Period.
Stay Disciplined, Stay Focused, and Stay Invested for Long Term.
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Happy investing.