When you're in your 20s, life feels like a storm of experiences.

There's always something exciting to do—traveling to new places, buying the latest gadgets, or simply enjoying a night out with friends.

And, investing often seems like something to think about "later," once you’re more established or have extra cash lying around.

But what if we told you that starting to invest right now, in your 20s, could be one of the best decisions you’ll ever make?

Let’s dive into why beginning early can set you up for life and how even small steps can have a huge impact.

The Power of Compounding: Your Money's Best Friend

Think of investing as planting a tree.

When you plant a seed today, it won’t grow into a massive tree overnight. But if you nurture it, give it time, and let nature do its work, you’ll end up with a tall, sturdy tree providing shade and fruit for years.

That’s precisely how compounding works in investing. The earlier you plant your financial seed, the more time it has to grow and compound.

Compounding means earning returns on your original investment and then earning returns on those returns, much like a snowball rolling down a hill and picking up more snow as it goes. Start early, and your financial snowball could grow into an avalanche.

Now, you might be wondering, "Is starting really that important?" The answer is a resounding yes, and here’s why.

Starting Early vs. Later: A Real-Life Example

Imagine two friends, Rohan and Priya.

Rohan decides to start investing ₹10,000 a month when he’s 25, while Priya waits until she’s 35 to begin. Both choose to invest in an index fund, which averages a 12% annual return.

Rohan keeps investing until he’s 60, accumulating a total of ₹42 lakh over 35 years. By the time he hits 60, his investment grows to a whopping ₹5.9 crore.

Priya, on the other hand, invests the same ₹10,000 per month but for only 25 years, reaching a total of ₹30 lakh. By age 60, her investment has grown to just ₹1.8 crore.

The difference is staggering—nearly three times more wealth for Rohan, simply because he started ten years earlier. Those extra years gave Rohan’s money more time to compound, turning a modest investment into a life-changing sum.

It’s a classic case of “time in the market” being more important than “timing the market.”

But What’s the Catch?

Of course, investing early isn't without its challenges.

In your 20s, making room in your budget for investments can feel like a sacrifice. After all, there are so many things competing for your hard-earned money—new experiences, trendy gadgets, or simply the freedom to enjoy life without pinching pennies.

It’s natural to crave instant gratification; we’re all wired that way. There’s a reason why buying that new smartphone feels more rewarding than putting the same amount into an index fund that won’t pay off for decades.

Then there’s the social pressure.

We live in a time when our peers' lifestyles are on full display. It’s easy to feel left out if you’re not keeping up.

However, what’s often missing in those picture-perfect social media posts is a behind-the-scenes look at the financial stress that can accompany a lifestyle of constant spending.

The truth is, most people in their 20s aren’t educated about the benefits of investing early, or they find the process intimidating. That’s where a mindset shift can change everything.

Rewiring the Way We Think About Money

So how do you convince yourself to invest instead of spend?

It starts with a simple shift in mindset. Think of investing as paying your future self. You’re not just stashing away money; you’re buying your future freedom.

The good news is, you don’t need to be a finance expert or have a lot of cash to get started. Small steps can make a significant impact, and the earlier you begin, the less you’ll have to invest each month to reach the same financial goals.

If the thought of investing still seems overwhelming, remember that you can start with as little as ₹500. Many investment platforms don’t even require a Demat account to get going.

With a Systematic Investment Plan (SIP), you can automate the process, making investing as routine as a subscription payment. It’s the small, consistent contributions that add up over time, thanks to the magic of compounding.

Why Index Funds are a Great Starting Point

For those just dipping their toes into the world of investing, index funds are a fantastic place to start.

They’re like the "all-rounders" of investments—affordable, diverse, and
low-maintenance. When you buy an index fund, you’re essentially investing in a collection of top companies.

This automatically diversifies your risk because your money is spread across many businesses, not tied to the fate of just one.

Index funds also come with lower fees compared to actively managed funds, where fund managers try to beat the market (and often fail).

And to add further, Index Funds have delivered better returns than actively managed mutual funds where the entry is not simple because of the effort of choosing the right scheme and the right fund manager.

From October 2020-2024, Nifty 100 Equal Weight Index Funds has given 2.67X ROI compared to 1.8X ROI from LargeCap Mutual Funds (Avg Weighted).
The results are self explanatory.

Small Steps to Get Started and Lower the Barriers

The idea of investing can be intimidating, especially if you think it requires large sums of money or deep financial knowledge. But that’s far from the truth.

Today, you can start with SIPs with as little as ₹100, the entry barriers have never been lower. Plus, you don’t need a Demat account, making the process even more accessible.

To ease your way in, start by assessing your risk tolerance. This simply means figuring out how comfortable you are with the ups and downs of the market.

Many platforms can help you with risk-profile-based recommendations, pointing you towards index funds that align with your comfort level.

Once you’ve chosen a fund, automate your investments through a SIP. This way, you’re consistently putting money aside each month without having to think about it. Just set it and forget it!

Review your investments every 6-12 months to ensure you’re on track, but avoid obsessing over daily market movements. Remember, investing is a marathon, not a sprint.

Conclusion

Investing early, even in small amounts, can have a significant impact on your financial future. The sooner you start, the more you benefit from the power of compounding, and the less you need to invest each month to achieve your goals. Index funds offer a simple, affordable way to begin, and with automated SIPs, the whole process can be as easy as a few clicks.

So, why wait? Start planting your financial seed today and watch it grow into a mighty tree that can support you for years to come.

Download IndexFundsSahiHai App and start your Index Investing journey today.