Kolkata: If inflation is a big wrecker of savings and investment, procrastination is an equally big nemesis. If you heard personal finance strategists reiterating the need to start investing as early as possible in life, it is not without reason. There are calculators that are available online and for free with which one can check the veracity of this advice.
SIP, or systematic investment plan, is the new instrument of choice for the Indian middle class. In April alone SIP inflow has surpassed Rs 26,000 crore, which means investment of well over Rs 1,000 crore a day. Let’s take the example of a mutual fund SIP to find out how delay can cost the fortunes of an average investor. Every personal finance advisor is of the conclusion that the early one begins to invest, the higher the gains. The logic: mutual funds harness the force of compounding which becomes a mammoth force in the long-term.
Cost of Delay calculator
A “cost of delay” calculator will illustrate the wealth destroying capacity of delay effectively. We can take the example of two persons. Let them invest a modest sum of Rs 10,000 every month in mutual funds through the SIP mode. Let one begin at the age of 25, while the other begins to invest at the age of 35. Let both of them continue investing till the age of 60. let’s also assume that both enjoy the same returns. We also assume that both invest the same amount throughout the period. Basically, we are creating a situation where all other factors, except the tenure of investment, identical for both.
The first person, who begins investing from 25, ends up amassing Rs 6.43 crore from this SIP only. He/she invests for 35 years. But the second person, who begins to invest the same amount 10 years later, ends up accumulating only Rs 1.88 crore. Therefore, the difference in final value of the SIP kitty is nothing less than Rs 4.55 crore. Which means the person who starts out 10 years earlier makes more than three times of what the other one makes.
“While most investors know, in a somewhat vague way, that one can create a bigger corpus of money with relatively less difficulty if one begins investing early, most have no idea what a huge difference can happen to the fortunes of a person by beginning to invest a few years early. Viewed from another perspective, one can build the same eventual kitty by investing a smaller amount in SIP by beginning earlier,” Nilanjan Dey, director, Wishlist Capital said. “What is significant is that one need not wait till one begins earning to begin investing. One can even start investing small SIPs with one’s pocket money even when studying,” Dey added.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, any form of alternative investment instruments and crypto assets.)
Procrastination, like inflation, is a major enemy of effective financial planning. The cost of delay in investment is huge and can mean a world of difference in a matter of a few years. See the calculations below. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
