A journey of thousand miles begins with a single step – LAO-TZU
Similarly, a journey to achieve financial freedom, journey to accumulate the corpus for your kids education/marriage or your retirement starts with regular and disciplined investing. Most investors are worried more about which stocks or sectors will deliver higher return. They are also more worried about any stock market correction that may erode their wealth. Remember more money has been lost waiting for the stock market fall rather than during the stock market fall. Below, I am going to show disciplined investing and remaining invested is key to creating wealth.
Starting early, investing regularly and giving your money time to grow is the KEY to long term wealth creation. In the example below, we show if you start early and invest for just 5 years (10,000/month). During the 5 years, you invest a total of 6 lacs. After 5 years, you do not invest anything but you also do not withdraw the money but let it grow (at 14%/annum) for 20 years more. After 25 years, the 6 lacs rupees that invested creates a corpus of around 1.2 crore. If you had invested 10000 every month, earning annual return of 14%, you will end up with a corpus of 2.72 crores. If you had invested 10000/month for 10 years (total investment 12 lacs) and let it grow for 15 years more. After 25 years, your 12 lacs investment will get you a corpus of 1.87 crore. Clearly, giving your investments time to grow is very important for wealth creation. Hence, starting early is crucial for wealth creation.
Corpus after 25 years In the chart below, I show how you regular and disciplined investing over long term is crucial for achieving financial freedom. In the left chart below, you invest 10000 every month and see how your corpus increases as your investment duration increases. On the right chart below, we invest the same amount (30 lacs) but spread it over different horizon.
PLACE FOR CHARTS
We see that if we give us longer time horizon, even smaller monthly contribution creates a bigger corpus than larger contribution over small period of the time.
Hope this helps in clarifying the key secret of wealth creation:
Start early.Invest regularly and remain invested longer.
Hope this helps. Please contact qualified advisor for making your financial plan.