Disciplined and regular investments can work wonders—so much so that a child can become a crorepati when he/she turns 18. This age is extremely significant for anyone since one begins college education at this age. One can also plan to start a business or a career — each of which could require a significant sum of money.
Parents can easily plan to attain this goal through a bit of financial planning. The earlier a parent realises this fact, the better for him/her. Let’s see what the rule is and how can one proceed towards turning the child into a crorepati by the time he/she is 18.
18 years time window
The rule pertains to investing in mutual funds. The time window of 18 years is a very long term in mutual funds and it allows compounding to play out its full potential.
The first point to note in this rule is that the 15 denotes a return of 15%. Though a return of 12% is regarded as a template return in equity funds, there are funds in the market that provide returns well over 15%.
SIP Calculator: Rs 10,000 a month
The next point to note is that the number 10 denotes the monthly investment in SIP – Rs 10,000 in this case. The other number 18 signals the investment window – in other words, 18 years.
Any SIP calculator will tell you that if you invest Rs 10,000 a month for 18 years and generate a return of 15%, the minimum amount that you can generate in the process turns out to be Rs 1,10,42,553 or Rs 1.10 crore. Therefore, the amount that your child will sit on a he/she becomes an adult, will be far more than Rs 1 crore.
Nominal investment Rs 21.6 lakh
The point to note is that the parents would be investing only Rs 21.6 lakh from their pocket and the gains that they would be registering is Rs 88.82 lakh.
If the SIP is continued for just 4 more years, the amount that would be generated would exceed Rs 2 crore and reach the figure of Rs 2.07 crore – netting a gain of Rs 1.80 crore on a nominal investment of Rs 26.40 lakh.
Becoming a crorepati on the 17th birthday – or when one turns 18 – is a cherished dream. Follow this rule to make your kid one. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
