The Cost Of Delay In Investing

Generally, people keep wondering what is the right age to invest in a mutual fund, equities or any other investment avenue. The general feeling is either it’s too early or too late to make an investment at a given point in time. But the reality is, the right age to start investing is NOW i.e. the moment you decide to invest. The sooner you start investing, the better it is as it allows the compounding effect to show its magic over the long term. The longer you stay invested, the more time your money gets to compound and grow. 

But the reality is, at times you tend to delay the investment decision owing to being busy with day-to-day schedule or other pressing matters. At that time, making investments may not appear to be a priority. Hence people tend to delay it by a few days, weeks or may be years. Ironically, this delay has a huge impact on your future investment outcomes. This is because the delay caused takes away the time available for compounding and as a result the value of investment will reduce considerably due to which there may be a shortfall when it comes to meeting critical financial goals like retirement, child’s education, marriage etc. 

If you delay your investments, whether through SIP or in lump sum, and invest a higher amount at a future date, still you will not be able to catch up with someone who started investing say five or 10 years before you. For better understanding, let us consider the example of three friends with similar retirement goal of creating a corpus of Rs. 4.01 cs after 25 years (@10% return).  

Ram starts investing today and has initiated a SIP of Rs. 30,000 per month to achieve his retirement goal. Shyam delays the investment by 5 years and invests the same amount through SIP but he is able to generate only Rs. 2.3 cr at the end of 25 years, i.e. a short fall of Rs. 1.71 crs. In case he still wishes to reach his goal, his SIP amount should increase to Rs. 52,400 per month. The third friend Kamal delays his investment by 10 years and then starts an SIP of the same amount. As a result, he will face a shortfall of Rs. 2.76 cr. To achieve the desired target, he will have to increase his SIP amount per month to Rs. 96,000. This clearly shows the cost of delay and so it makes sense to start investing today as Ram did. 

Akin to the hare and tortoise story, slow and steady investments started early will help you reach your financial goals comfortably, instead of starting late even if you are willing to invest more. In a nutshell, be mindful of a few things while investing:  

1) Stick to your Financial plan - Get your financial plan drawn by an expert and then stick to that plan to achieve your goals. 

2) Start Today - Today is the best day to invest even if your investment is small. 

3) Invest regularly - Just like an EMI, you need to keep investing through a SIP regularly or lump sum amount as and when you have money. Stay invested through the ups and downs of the market keeping your financial goals in mind. 

4) Stay invested & be patient – Initially, your investments may move slowly but be patient and let compounding weave a magic around your investments. This will be visible after investing for close to a decade.  

Now we know that planning to invest with delayed execution is a dangerous proposition. The delay could be due to a variety of reasons but always remember that there’s a huge cost to pay for delaying your investment decision, so initiate your investments today!