What Is the Best Age to Start SIP in India - 2024 (2024)

The best age to start SIP is now, as investments are better done as early as possible. Mutual funds have become one of the most in-demand investment instruments. The total value of investors' shares in mutual funds increased 44% from last year, growing from Rs. 23.92 lakh crore in April 2023 to 34.52 lakh crore in April 2024. The significant increase in investments in mutual funds showcases how they are one of the most sought-after investment instruments if you are looking to invest systematically.

One of the best features of mutual funds is that you can invest through an SIP (Systematic Investment Plan). It means you can invest a predetermined amount at regular intervals in mutual fund schemes of your choice and see your investments grow through capital appreciation and the power of compounding.

However, when it comes to investing, investors are often confused and want to know what is best age to start SIPs. This blog will help you find the answer to that question.

SIP: Your path to consistent wealth-building

SIPs are one of the most significant features of mutual funds, allowing you to invest systematically over time. Unlike other investment instruments such as FDs and bonds, you do not have to invest a large amount in one go; you can invest a lower amount at regular intervals. SIPs in mutual funds work similarly to a deposit scheme, where you can set a specific amount to be invested in mutual fund schemes of your choice.

SIPs provide investment simplicity to investors as, unlike equities, you do not need to invest manually every time. SIPs are automated, and your decided investment amount is automatically debited from your bank account on a set date and invested.

SIPs also provide good returns to investors because of their market timing feature. As the investment is recurring, investors end up buying more mutual fund units when the market is down and fewer units when the market is up. This strategy is known as Rupee Cost Averaging and is considered a smart investment approach to balance out the volatile market factors.

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What is the best age to start SIP?

A common question among new investors is, ‘What is the best age to start SIPs?’ However, there is no best age to start SIPs; you should start investing in SIPs as soon as possible to give your investments more time to compound and give you higher returns.

• If you are in your 20s and 30s, you should definitely consider investing in mutual funds through SIPs. This will result in higher returns through compounding, as your investments will have more time. If you delay your SIPs now, it is at par with losing out on profits.
• If you are in your 40s and 50s, you should consider starting your SIPs to ensure you build wealth for a comfortable retirement. SIPs allow you to have a corpus at a time when you won’t have a primary source of income. You can use your accumulated wealth in SIPs to ensure you live without any financial burden.

The role of age in SIP

The role of age is significant in SIPs as it decides how much time your mutual fund schemes will have to compound and multiply your investments. The more time you stay invested, the more potential returns you can get. Here are different age profiles to understand the role of age in SIPs:

When you start investing in SIP at the age of 20 years?

• Time horizon: Investing in your 20s at a young age gives you a longer time horizon.
• Power of Compounding: More time allows for greater compounding effects. Even small investments can grow significantly over time.
• Risk Tolerance: Younger investors have a higher risk appetite and can invest in higher-risk, higher-return assets with a higher asset allocation in equity mutual funds.
• Investment amount: Investors in their 20s can start with a lower amount as they have a higher investment horizon.
• Financial goals: Sufficient time to achieve long-term financial goals such as buying a house, retirement, etc.

When you start investing in SIP at the age of 30 years?

• Time horizon: Investing in your 30s is still early and can give you a respectable time horizon.
• Power of Compounding: The compounding effect can provide good returns but lower than starting in your 20s.
• Risk Tolerance: Investors in their 30s have a moderate risk tolerance and can manage risk by creating a balance between equity and debt mutual funds.
• Investment amount: Investors in their 30s may need a higher regular investment amount to ensure they earn sufficient returns.
• Financial goals: Important to plan for mid-to-long-term goals like children's education and retirement.

When you start investing in SIP at the age of 50 years?

• Time horizon: Investing in your 50s is comparatively late, with retirement approaching and less time to earn higher returns.
• Power of Compounding: The compounding effect is limited as there is little time for the investments to grow.
• Risk Tolerance: Investors in their 50s have very low risk tolerance and focus more on investing in debt mutual funds than equity mutual funds.
• Investment amount: Investors in their 50s need to invest larger amounts to ensure they achieve their investment goals in a shorter period.
• Financial goals: The financial plan is to have an adequate amount for retirement.

When you start investing in SIP in the age of minors (below 18 years of age)?

• Time horizon: Minors below 18 of age have an extremely long investment horizon, leading to exceptional long-term returns.
• Power of compounding: The compounding effect is maximum as the investments see one of the highest time horizons.
• Risk tolerance: Minor investors have the highest risk tolerance and generally invest a majority of the amount in equity mutual funds as high-risk, high-return assets.
• Investment amount: Investors under the age of 18 can start with very small amounts, as the investment horizon is long-term.
• Financial goals: Building a substantial corpus for higher education, mid-term goals, and long-term financial security.

Top reasons to start investing at an early age

Here are the main reasons to start investing at an early age:

More recovery time

Investments in the capital market are volatile. However, when you invest at an early age, your investments have sufficient time to recover from market downturns. Longer investment horizons ensure that your investments can rebound and grow, minimising any negative effects of short-term volatility.

Improves risk-taking ability

Starting SIPs early gives investors the advantage of time, enabling them to take on higher-risk investments that may provide higher returns. Younger investors can afford to allocate a larger portion of their SIP amount to equity mutual funds, which, despite their volatility, offer substantial growth potential, maximising wealth accumulation over the long term.

Time value for money

Regular investments through SIPs in good mutual fund schemes can provide substantial returns to investors, increasing the time value of money invested. Investing early allows for a better compounding effect and helps investors to earn better returns over a long period.

Secured future

Starting SIPs early provides investors with a financial cushion to ensure they save an adequate amount for future expenses. By investing early and saving a larger amount, young investors can achieve major life goals such as buying a home, funding education, and enjoying a comfortable retirement.

Become a creditor

Investing early can transform individuals into creditors rather than debtors. With earning more than sufficient funds, you will never need to borrow money from someone else and you can even lend money to others at an interest for further earnings.

Save more

Starting investments early creates a habit of disciplined savings. The habit of regularly setting aside funds for investments becomes a regular habit, leading to substantial savings over time. No matter how small, regular contributions in investment instruments such as mutual funds can result in building a significant corpus that can ensure financial stability.

Support your retirement plans

Early investing ensures that your investments have a long time to grow as the compounding effect is higher. As your investments compound, the returns also grow, allowing you to save for a comfortable and secure retirement.

Conclusion

SIP investment is an ideal way to invest in mutual funds and ensures your investment grows systematically. When you consider SIPs, there is no ‘best age’ to start, and you should consider starting an SIP today. Now that you know the answer to the question, ‘What is the eligibility age for SIPs?’, you can invest in mutual funds today and ensure a stable financial future.

If investing in mutual funds is on your mind, look no further than the Bajaj Finserv Mutual Fund Platform. You can visit the platform and compare mutual funds using the unique mutual fund calculator and start investing to achieve your financial goals.

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