The amount of investment amount in investment is as important, the more important you invest. Especially the power of compounding works only when you maintain your investment for a long time. During this time, returns are received on your investment and this return goes on to join your investment. This generates more returns on your investment every next year. In this way compounding makes your investment manifold in the long term.
Benefits to start investment soon
This can be easily understood from an example. Suppose you invest one lakh rupees, on which you will get 12 % return annually. You give this money a chance to grow, do not withdraw even one rupee from it. At what age you invest this, you will see a big difference.
More profit on investing at the age of 20 years
If you invest one lakh rupees at the age of 20, then when you are 60 years old, then your investment increases to about 100 times i.e. 1 crore rupees. This is amazing of compounding magic in 40 years. Your money kept growing rapidly every year due to compounding.
Less benefits on investing at the age of 30 years
Now we assume that you have invested this at the age of 10 years i.e. at the age of 30 years. So this money will be only 30 times by your 60 years old. This means that your investment of 1 lakh rupees will be 30 lakh rupees. By starting investment only 10 years late, the opportunity to earn 70 lakh rupees wealth went out of your hand.
Small benefit from investing at the age of 40 years
Now we see what happens when you start investing at the age of 40. On starting investment at the age of 40, the investment gets only 20 years to increase. Then your investment of one lakh rupees increases only by 10 times, that is, it is only 10 lakh rupees. This return is not bad, but is much less than the return you get when you invest at the age of 20.
Investment is not an investment time, the duration of investment is important
The above example shows that in investment it is not important when you invest but it is important how soon you start investing. The magic of compounding works only when the investment gets a long time to grow. In the early years your money increases gradually. But, later it grows very fast, especially at the end. The reason for this is compounding.
Compounding works only when investment is for a long time
This means that the younger you start investing at the age, the greater the chances of preparing a big fund for you. If a person invests a low amount in 20-22 years, a large fund will be prepared for him till retirement. Compounding benefits only when there is discipline and patience in investment. So if you are 20-22 years old and think that the amount of one lakh rupees is not high, then keep in mind that this money can be increased one day to one crore rupees.