Unnecessary delay or procrastination is perhaps the biggest nemesis for long-term financial planning or retirement planning for most of us. Experts say it is not the lack of investible surplus, but the lack of initiative that lies at the root of this delay.
Gains lost can be huge
You would be surprised to know how much gains we lose by delaying investments.
A demonstration of the loss that many of us incur in this manner is worth noting. And nothing shows it more effectively than a Cost of Delay calculator.
Calculator in AMFI and other websites
These are available free online in many websites including that of AMFI (Association of Mutual Funds in India).
It helps one to understand the result of delaying systematic investment by specific periods. It helps you find out the additional money required to reach your goal if an investor delays the beginning of the investment. Even small delays can greatly impact one’s long-term investments.
The difference in value generated over time can be really huge.
SIP of Rs 5K a month for 35 years
Let’s imagine a person starts a Systematic Investment Plan or SIP of Rs 5,000 every month at the age of 25 years. He/she continues it up to the age of 60, when he retires.
In this scenario, he/she invests a total amount of Rs 21 lakh to get a final value of Rs 3.22 crore.
SIP of Rs 5K a month for 30 years
Now, think of a scenario, another person begins the same investment at the age of 30 – the same amount every month and continues the SIP till 60, when he stops getting a salary.
The calculator will show that the second person will generate a total amount of only Rs 1.75 crore –a good Rs 1.47 crore less than what the first person makes. Therefore, small delay of 5 years pushes him back by Rs 1.47 crore, which would hurt every investor.
So investing for 30 years is certainly a very long tenure, but it loses out heavily if the same investment can be continued for 35 years.
Invest early, harvest more
“Investing early is a mantra that every financial advisor chants constantly in the ears of every potential investor. I think bodies such as AMFI should undertake concerted campaigns such as ‘Mutual Funds Sahi Hai’ to drive home the message of investing early in life. In fact, one should not wait till working life to invest. A beginning can be made with pocket money from late school years,” said Nilanjan Dey, director, Wishlist Capital.
So, shake off your inertia and begin your journey. The sooner you take the first step, the further you would reach.
(Disclaimer: This article is only meant to provide information. News9live.com does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
Inertia is perhaps the biggest nemesis of long-term financial planning. The Cost of Delay calculator effectively demonstrates how much delay in investing sets us back. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
