Start SIP Early to Build Wealth Faster, Delay Can Cost You Big

November 16, 2024 By: Naresh Saini

Starting an SIP (Systematic Investment Plan) early is one of the smartest ways to build wealth over time. The earlier you begin, the more you can benefit from the power of compounding, which significantly multiplies your wealth over the years. However, delaying investments by even a few years can lead to higher financial burdens later, as shown by a study conducted by FundsIndia Research.

The Impact of Delaying SIP Investments

When you postpone your SIP investment, you not only reduce the time for your money to grow but also increase the amount you need to invest to reach the same financial goal. This is because compounding works best over longer durations.

Here’s a comparison:

• Starting SIP at Age 25: To accumulate ₹10 crore by age 60, you need to invest ₹15,000 monthly at an expected return of 12% annually.
• Starting SIP at Age 30: For the same goal, the monthly investment jumps to ₹28,000.
• Starting SIP at Age 40: You’ll need to invest a massive ₹1,00,000 per month to meet the same ₹10 crore target.

This shows that delaying even five years can significantly increase your financial burden.

Lump Sum Investment: The Earlier, The Better

If you prefer lump sum investments over SIPs, the timing still plays a crucial role in the returns you generate. For instance:

• Investing ₹1 lakh at age 20 can grow to ₹1 crore by age 60.
• Investing the same amount at age 30 will result in ₹30 lakh by age 60.
• Delaying to age 40 will yield only ₹10 lakh by age 60.

This stark difference highlights how the compounding effect diminishes with time.

Why Early Investing Matters

1. Maximizing Compounding Power: The earlier you start, the more time your investments have to grow exponentially.
2. Smaller Monthly Commitments: Starting early means you can invest smaller amounts to achieve the same target compared to starting later.
3. Less Financial Pressure: Early investments spread the financial load over a longer period, making it easier to manage.

How to Start Investing Early

1. Set Clear Goals: Define what you want to achieve—be it retirement planning, buying a house, or your child’s education.
2. Choose the Right SIP Plan: Look for mutual funds that align with your financial goals and risk appetite.
3. Start Small, Stay Consistent: Even if you begin with a small amount, regular contributions will eventually add up.
4. Track Your Progress: Regularly review your investments to ensure they’re on track with your goals.

The Cost of Waiting

Procrastinating your investment decisions can lead to missed opportunities and higher financial stress. For example:

• A 10-year delay in lump sum investment reduces your returns by 70%.
• Delaying SIPs can triple the amount you need to save monthly to meet the same goal.

Key Takeaways

Starting SIPs or lump sum investments early ensures that your wealth grows efficiently with minimal financial burden. Don’t wait—begin investing today to make the most of your money. Visit a financial advisor or explore online platforms to kickstart your journey toward financial freedom.