The Hidden Cost of Delaying Investments: Why Starting Early Matters in India
In India, we often hear about the importance of saving, but less attention is given to the critical difference investing early can make. A concept that is often underestimated or overlooked is compounding—the key to building significant wealth over time.
While we know that investing is good, what many people fail to realize is the true cost of delaying their investments. This cost is far more than you might imagine, and it’s something you should start thinking about early in your financial journey.
The Snowball Effect: Why Early Investing is Crucial
Imagine you’re on top of a hill, holding a small snowball. As you roll it down, it picks up snow and grows larger with every turn. This is essentially how compounding works. The earlier you start investing, the larger the “snowball” you can build because your money has more time to grow.
Remember Jonny’s story? A small boy who starts throwing snowballs down the hill early. Another boy tries to follow him but starts much later, and his snowball is smaller despite putting in the same effort. This illustrates how starting your investments early allows you to benefit from compounding returns over time.
Why is Delaying So Costly?
Starting late can have a massive impact on how much you can earn over time. For example, let’s compare two individuals:
Ravi, who starts investing ₹5,000 per month at the age of 25 and continues until he is 45. Rohan, who delays his investments and starts at 35, investing the same amount until he is 55
Even though they both invest for 20 years, Ravi’s investments will grow significantly more, thanks to the power of compounding. The difference in returns isn’t just because of the number of years—they both invested for 20 years—but because Ravi’s money had more time to grow.
This is exactly how mutual funds have seen massive growth in India over the last few years. Investors who started investing in mutual funds, particularly through systematic investment plans (SIPs), even with small amounts, have witnessed their wealth multiply over time.
The Power of Compounding in Indian Investments
Let’s bring this closer to home by looking at the growth of mutual funds in India. According to the Association of Mutual Funds in India (AMFI), the mutual fund industry has grown from ₹6.14 trillion in 2012 to an astounding ₹46.63 trillion by 2023. This growth isn’t solely due to more people investing; it’s also because early investors, particularly through long-term SIPs, have benefited immensely from compounding.
For example, if you had started an SIP in 2010 with just ₹1,000 per month in an equity mutual fund, the returns today could easily be upwards of ₹4-5 lakhs, depending on market performance. Contrast this with someone who waited till 2015 to start the same SIP, and you’d find their returns to be significantly lower. This is why the best time to start investing is today, even if you can only contribute small amounts.
How to Benefit from Compounding
- Start Early:
The sooner you begin, the more time your money has to grow. If you’re in your 20s or 30s, there’s no better time to start an SIP.
- Be Consistent:
Investing isn’t a one-time event. The key is to keep adding to your investment regularly. SIPs in mutual funds are an excellent way to do this as they automatically invest a fixed amount each month.
- Be Patient:
Compounding doesn’t show massive returns in the short term. It requires time and discipline, but the long-term rewards can be tremendous.
- Don’t Time the Market:
Timing the market is notoriously difficult, even for seasoned professionals. Instead of trying to predict the perfect moment, invest regularly and let your investments grow over time.
- Reinvest Dividends:
If you receive dividends or other income from your investments, reinvest them. This will help you take advantage of compounding even more.
Real-Life Examples of Successful Early Investors
In India, we can look at how young professionals who started investing in mutual funds and other instruments have seen their wealth grow. For example, Ramesh, a 28-year-old IT professional in Bangalore, started investing ₹10,000 per month in a mutual fund at the age of 25. After eight years, his portfolio has grown to over ₹15 lakhs due to consistent investments and market performance. Had he waited until he was 30 to start, the amount would be far less.
Similarly, Shalini, a teacher in Mumbai, began her SIP with just ₹3,000 a month five years ago. Today, despite market fluctuations, her portfolio has grown significantly, giving her a solid financial foundation.
How to Get Started with Mutual Funds in India
The good news is that starting with mutual funds in India has never been easier. You can open an account online within minutes, and platforms like Viso and others offer expert guidance on selecting the right funds for your goals. The key is to start as soon as possible, even if you’re just beginning with a small amount like ₹500 or ₹1,000 a month.
The Bottom Line: Delay Costs You More Than You Think
As we’ve seen, the cost of delaying your investments isn’t just about the missed opportunity to earn; it’s also the compounding effect that works against you. The longer you wait, the harder it becomes to catch up. The beauty of starting early is that time does most of the heavy lifting for you. So whether you’re a young professional or someone who’s still figuring out their financial strategy, the message is simple: start investing today.
Not only will you build wealth, but you’ll also secure your financial future with minimal stress. As the saying goes, “The best time to plant a tree was 20 years ago. The second-best time is now.”
