5 reasons you should start investing in 20s-
We all keep listening from people about how to live life when you are an average 20. For most of us, life in our 20's is good about experiment, change and growth. Often it’s the time where we learn the most important lessons about things that really matters. So there is no better time to learn about money management than 20's.
Time is on your side
The best part of investing in early 20's is you have so many years ahead of you to build. The most crucial aspect of investing is the power of compounding. Compounding interest is like a snowball rolling downs a hill, it adds up more and more snow until it became an unstoppable avalanche.
An average 25-year-old, who invests 5,000 a year and makes 10% growth, would have $2,430,366. That’s a millionaire who didn’t have to take any crazy risks or who had a very average income.
Nobody talks about that story because it’s boring. But it’s so possible, especially for the one in 20's. What if the average 25-year-old above had invested at 20 instead of 25?. That person would have $3,947,653 and that is almost double in only 5 years. The power of time is exceptional. Don’t ignore it because "Time is Money".
You can survive a market crash.
After watching the market scenario people assume that it’s very risky to invest than just hold their money. Whereas, the fact is that a smart investor never get worry about market crashes. As Chris Nicholson from Future Advisor quoted about market risk:
“If you’re in your 20s, and you invest in the stock market and it crashes, you don’t have to realize those losses. You can just ride it out. If you invested at the stock market peak of 2000 and fell asleep until 2002, you would’ve ended up with 150% of what you started with. And there was a huge crash in-between. Most people lost about 60% of their money.”
The worst case of losing money is if you liquidate your money when markets are low. When you start investing in early 20s, you don’t need to take money out of market. You can hold on and wait for markets to recover in tough times, at last you’ll end up with more money than you started with. To put it in another way: you don’t get affected by what the market looks like over the next few months. You care what it looks like over the next few decades.
You’ll make more money. A lot more money.
As per Patrick O’Shaughnessy at Millennial Invest, each rupee you invest at age of 22 will worth 17times at the time of your retirement. That’s a huge amount of increase and is an impressive growth. You might be thinking, “Okay, but what if I invest when I’m 30, still I could make a handsome money before I retire.” You wouldn’t be wrong, but instead of making 17times for every rupee you invest, you would be making 10 times and if you wait till the age of 35, you will get 7 times for every rupee you invest.
You can hit your bucket lists, hard.
When you start investing in early 20s, you can manage to hit your bucket list better than anyone. Every time market jumps to higher side, your money increases. With the increased portion your money you can hit a new thing out of your bucket list.
You can comfortably donate money to charity.
We all want to make this society a better place to live by doing whatever we can. If you invest for long term in early 20s, Dividends also becomes a part of your income sources. With that part of income, you can contribute towards making of a better society. Maybe you can pay for education of an underprivileged child or donate to someone who is in need.
While investing in early 20s have its own advantages, not being smart with money management has its own disadvantages. In reality, being careless about personal finance in our 20s could cost us a whole lot more down the road. Later It can push us into unsustainable patterns in our 30s and 40s when it comes to budgeting, debt and investing. The good news is there’s no better time than the present to turn it all around. People who start to invest in their 20s are not only taking proactive steps toward a stable future, they’re also cashing in on investing’s best friend: time. The best part about investing in early 20s is you make money or better said a lot of money.