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What are the fundamental rules of investments?
There are three fundamental rules of investments:
a) Start Early
b) Invest Regularly
c) Invest for a long period of time
Raj started investing money to the tune of Rs. 5000 pm diligently. He began this discipline at the age of 22 years of age. He was earning a rate of interest of 12% compounded each year. While his friend, Amrita started investing money to the tune of Rs. 10,000 pm. She was also doing this very religiously. She also earned 12% compounded. She started the process of doing the investments month on month, at the age of 30. What is the total investment adding up to at the age of 50 years of age?
As you can see from the table the cost of waiting / delaying for Amrita is Rs.37,63,806. Raj benefited from eight more years of compounded growth than Amrita.
Therefore it is very important to start investing early. The earlier, the better for your investments.