5 Reasons Why Every Millennial Should Start Investing Now

• Date : August 26,2023

In today's fast-paced and ever-changing world, the millennial generation faces unique financial challenges that can often feel overwhelming. In the race to succeed in this fast-paced world, it can be easy for young millennials to overlook the importance of investing. Even if young adults are thinking about investing, the abundance of information being disseminated confuses them, often leaving them with the question of how and when to start investing. 

Investing is not something just for wealthy or experienced investors. Young adults who are just starting their careers can also start investing early to stay ahead of the game and fulfil their financial needs.

 

Here are 5 reasons why every millennial should start investing now -

1. The power of compounding: The best advantage of the power of compounding can be taken when the investment horizon is long. Millennials are gifted with an abundance of time which they can use best to their advantage by investing early. Even if small amounts are invested over a long period of time, returns will be significant due to the compounding, hence building a solid financial foundation for their future. Starting early allows millennials to reap the benefits of compounding over a more extended period, providing an opportunity for their investment to grow exponentially.
    
2. Long investment horizon: Millennials are in their late 20s or early 30s, which means they have the luxury of time to cancel out market volatility and benefit from a long-term investment horizon. Just to give you a perspective, over the period of 25 years, equity mutual funds have generated returns of 16.30%, meaning, if you had invested Rs 1,00,000 25 years ago, the value today would be Rs 60.30 lakh, a 60x growth (Ace MF, March 2023).
    
3. Inflation: The 20-year average inflation rate is 5.5% (RBI, Internal Research, 2023). If currently, your monthly expense is Rs 40,000 then 10 years later it would be Rs 69,000, 20 years later it would be Rs 1.18 lakh and 30 years later it would be Rs 2.02 lakh. It is very important to invest enough to beat inflation. When it comes to generating a high real rate of return, equity mutual funds beat all other asset classes.
   
   For instance,  the real rate of return of gold is just 4.46% as compared to the 10.18% returns given by equity mutual funds. Fixed deposits barely beat inflation, factoring in the impact of tax, it wouldn’t even be sufficient to beat inflation.
   
   Source - Gold and FD returns are 25-year average shared by KITCO & RBI, respectively. Mutual funds returns are 25-year average returns for available select MF equity funds based on internal study.
    
4. Low entry barrier: Millennials are in the early stages of earning and hence might not have enough capital to invest huge sums of money. However, mutual funds have a very low entry barrier. Investors can start with as little as Rs 500. Moreover, they can opt for SIP through which they can invest small amounts every month. Hence, investing is now very accessible to those with limited funds. 
    
5. Fulfilling financial needs: With the habit of investing early and regularly, investors can fulfil their financial needs sooner. By building a sizable portfolio, investors can fulfil their aspirations such as starting a business, buying a home or travelling the world. Moreover, millennials can plan for early retirement to spend their golden years with their friends and family.

To conclude, investing early is very beneficial for millennials in providing a financially secure future. By starting early millennials can take the best advantage of the power of compounding and stay ahead of inflation. Millennials new to investing can seek guidance from a mutual fund distributor. A distributor can help investors to match their financial needs with their risk profile and guide them in picking a suitable mutual fund scheme for them. With timely fulfilment of financial needs, millennials can ensure a solid financial future.

Disclaimer: The information contained herein is only for information and does not constitute, and should not be construed as investment advice or a recommendation to buy, sell, or otherwise transact in any security or investment product or an invitation, offer or solicitation to engage in any investment activity.  Mutual fund investments are subject to market risks, read all scheme-related documents carefully before investing.