Many of us imagine that investment starts with big sum of money. No doubt, BIG investments yield BIG maturity value. But let us not under estimate the power of small investments. Following calculations would clearly prove this point:
As you would see, same investment of Rs.9,00,000 spread over a long duration yields higher returns than on shorter period. This is because of compound interest, which Sir Albert Einstein suitably called it as “Eighth Wonder”. The longer you invest / stay invested, higher is the returns.
For the same 20 year period, Rs.15,000 monthly investment would have yielded Rs1.5 Crores. But investing 15,000 monthly for such a long duration could be challenging. Rather than committing huge monthly investments and breaking the process inbetween, it is wiser to opt for lower monthly investment, but for longer duration.
This small, disciplined, automatic, long term investment needs to be apart from active, adhoc investments which we normally make. Every investor should definitely have SIP's as part of their portfolio. Wealth creation is often a product of discipline.
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