The logic behind starting Investing early in life.

This is a sequel to my earlier post on Investment behaviour,

In the world of investment, the critical component is time.

One can have apprehensions over the fickleness of the financial markets. But surprisingly, they are very reliable over long-term.

We can illustrate the importance of time through a real-life example.

"Anu and Anil are twins.

Anu invests Rs 20,000 a year for 20 years. Then she leaves her money in the fund and doesn’t add a Rupee for the next five years. She then plans her retirement and checks her balance. It is Rs 2,029,323 – nearly 20 lakhs rupees for an outlay of Rs 4 lakhs (@ 10% per annum net return on investment).

Anil, was always a little slow to take off. He invests the same Rs 20000 per annum for 20 years. But, he starts his investment a full 5 years after Anu started hers. He retires the same time as Anu.

Remember both have invested the same amount per annum over the same number of years. It is logical to expect that they would have achieved the same results.

Far from it. Five years of procrastination had cost Anil dearly – well over 5 lakhs rupees – he took home Rs 1,260,049.

Why? Because for five years Anu earned money in her sleep, reaping the benefits of compound interest on her initial 20 years worth of investing.

Unfortunately for Anil, he missed out on those five crucial years of build-up and the only benefit he ended up with was that of hindsight".

Make your money work for you today. Tomorrow may be too late.