| Particulars | Simple interest | Compound interest |
| Initial principal | Rs. 1,00,000 | Rs. 1,00,000 |
| Rate of interest | 5% | 5% |
| Interest for year 1 | Rs. 5,000
(Rs. 1,00,000 x 5%) | Rs. 5,000
(Rs. 1,00,000 x 5%) |
| Total investment value at the end of year 1 | Rs. 1,05,000
(Rs. 1,00,000 +
Rs. 5,000) | Rs. 1,05,000
(Rs. 1,00,000 +
Rs. 5,000) |
| Interest for year 2 | Rs. 5,000
(Rs. 1,00,000 x 5%) | Rs. 5,250
(Rs. 1,05,000 x 5%) |
| Total investment value at the end of year 2 | Rs. 1,10,000
(Rs. 1,05,000 +
Rs. 5,000) | Rs. 1,10,250
(Rs. 1,05,000 +
Rs. 5,250) |
| Interest for year 3 | Rs. 5,000
(Rs. 1,00,000 x 5%) | Rs. 5,512.50
(Rs. 1,10,250 x 5%) |
| Total investment value at the end of year 2 | Rs. 1,15,000
(Rs. 1,10,000 +
Rs. 5,000) | Rs. 1,15,762.50
(Rs. 1,10,250 +
Rs. 5,512.50) |
So, you see how the rise in the value of investment is higher each year in the case of compound interest? Now, let's see how compound interest works best if you start investing early.
FAQs
Resiliency and risk tolerance
Younger people can take on more aggressive investments with generally higher rates of return because they have more time to ride out rough patches in the markets before they reach the age of retirement.
Why should I start investing at a young age? ›
Resiliency and risk tolerance
Younger people can take on more aggressive investments with generally higher rates of return because they have more time to ride out rough patches in the markets before they reach the age of retirement.
Why do you need to start investing? ›
Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value.
Why is it important to start investing for retirement at an early age group of answer choices? ›
Compound Interest Is Your Friend
Compound interest is the best reason it pays to start early with retirement planning. If you're unfamiliar with the term, compound interest is the process by which a sum of money grows exponentially due to interest more or less building upon itself over time.
What is the advantage of starting to invest at a young age on Quizlet? ›
What is the advantage of starting to invest at a young age? You have a longer time horizon, so your money has more time to compound and grow. Why is investing a more powerful tool to build long-term wealth than saving?
Why is investing in youth important? ›
The Potential and Power of Young Generations
They are unafraid to challenge the status quo and embrace innovative thinking. By investing in their education, skill development, and well-being, we can equip them with the tools they need to become leaders, entrepreneurs, and change-makers.
Why investing in your 20s is important? ›
Set good financial habits now.
Right now, in your 20s, you have time on your side to create positive financial habits and potentially compounded wealth. Investing in your 20s can increase the likelihood of reaching your financial goals and giving yourself choice and flexibility. Your future self will thank you.
What are the main reasons to invest? ›
Why Invest? Top 10 Benefits of Investments
- 1 – Grow Your Wealth. ...
- 2 – Provide Regular Income. ...
- 3 – Plan for Retirement. ...
- 4 – Diversify Your Portfolio. ...
- 5 – Combine Passion With Financial Growth. ...
- 6 – Market Performance and Growth Potential. ...
- 7 – Better Option Than Savings Accounts. ...
- 8 – Tax Advantages.
The earlier you start investing, the faster you can grow your money and make it work for you. Inflation means your money is losing value when it's not invested. Saving and investing are different. It's important to do both, for money you may need in the near future (savings) and in the long term (investing).
When should we start investing? ›
There is no better time to start investing. It is very difficult to time the markets and although the markets are due for a correction, it would not be wise to wait further. Also, when it comes to SIPs, there is not much merit in timing the markets. We would suggest you invest in different mutual fund categories.
To turn $5,000 into more money, explore various investment avenues like the stock market, real estate or a high-yield savings account for lower-risk growth. Investing in a small business or startup could also provide significant returns if the business is successful.
What should a 20 year old invest in? ›
Investment options for beginners
- ETFs and mutual funds. These funds allow investors to purchase a basket of securities at a fairly low cost. ...
- Stocks. For your long-term goals, stocks are considered one of the best investment options. ...
- Fixed income.
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
Why is investing at a young age good? ›
Young investors have the flexibility and time to study investing and learn from their successes and failures. Since investing has a fairly lengthy learning curve, young adults are at an advantage because they have years to study the markets and refine their investing strategies.
Why do young people invest in stocks? ›
Equities offer comparable, if not superior, returns compared to property over the long run. With young people increasingly being priced out of the property market, we are seeing younger investors buying more heavily into equities, compared to prior generations.
Why is it good to save money at a young age? ›
“The sooner you start saving, the faster your money can grow from compound interest.”
What age do most start investing? ›
Beginner investor demographics
| Age | Percentage of first-time investors |
|---|
| 25-30 | 27.0% |
| 31-36 | 25.9% |
| 37-45 | 16.5% |
| 46+ | 10.6% |
1 more rowFeb 6, 2023
The Right Age
In India, once you have reached the age of 18, you can easily start trading. This is the right age to start if you really have an interest in trading, as you have years ahead to master tactics and strategies. You can always sign up with a dependable brokerage friend like Motilal Oswal to help.
Is 18 too young to invest? ›
To recap: The minimum age to invest in stocks and other investments completely on your own is 18 years old. However, minors are allowed to make investment decisions within a joint brokerage account shared with an adult.
