The Wall Mag... this is a blog page that hs been made by a group of students who have left their beloved college are working all over the world in best of companies.. some even studying abroad and are telling each other about their lives and times there. I too go on that page off and on.
Ok before you start questioning...what has the wall mag got to do with this blog... well.. the last two posts on the blog have revealed a lot of frustrations that is among the young who have hefty jobs and are earning taxable incomes for the first time. There are a lot of dreams.. a lot creativity alot of desires that are being left behind by these brilliant minds just to earn some money... but then isn't money that makes the world go round and it surely does.
So how can this same money buy happiness? By making this money earn for you...and work for you. The very first thing that a youngster does with his first salary is to maybe give it to his parents or buy gifts etc... but never does he sit and think about making it grow. Dont believe me... well.. believe this then... A Reader's Digest Survey says- Most young Indians are either not investing at all or not starting early enough...
oops... now that is sad news... by the time you are 30 and realise that you have responsibilities of a family that you have started... it might just be a lil too late.
The Key word here is- COMPOUNDING.
This key word, surprisingly works with another factor that influences ultimately the lifestyle of your retirement... Time.
Yes.. we have all learned our 9th standard mathematics that tought us about compunding intresests for the various profit and loss problems... and surprisingly its the same compounding interest that gives you loads of savings via investment plans.
Here is a lil story for you guys... this one is pretty old... I stumbled upon this when I was researching for various things for this article.
Ram and Shyam. Both start working at the same time at the age of 23. Ram starts saving when he turns 25 and invests Rs 50,000 every year. Assuming that on this he earns a return of 10% every year, at the end of ten years, Ram has been able to accumulate Rs 8.77 lakh.
After this, due to financial constraints Ram is not able to invest Rs 50,000 every year. But at the same time he does not touch the money that he has already accumulated, hoping to live of it when he retires.
He lets the Rs 8.77 lakh grow and assuming that it continues to earn a return of 10% every year, he would have been able to accumulate around Rs 95 lakh by the time he turns 60. So the Rs 5 lakh (Rs 50,000 x 10 years) he had invested in the first ten years has grown to Rs 95 lakh: even though Ram stopped investing Rs 50,000 every year after the first ten years.
Now let's take the case of Shyam. During the first few years of his life Shyam enjoyed life spending money on all kinds of things rather than invest regularly. At the age of 35 reality suddenly dawns on him and he starts investing Rs 50,000 every year. He invests this amount every year till he turns 60, i.e. for 25 years. Assuming he also earns a return of 10% per year on his investments. At the end Shyam would have managed to accumulate Rs 54.1 lakh.
Even after investing Rs 50,000 regularly for 25 years, Shyam has managed to accumulate Rs 54.1 lakh, which is around Rs 41 lakh less in comparison to Ram. Now Ram has invested only Rs 5 lakh over the ten years he invested. In comparison, Shyam over the 25 years has invested Rs 12.5 lakh (Rs 50,000 x 25 years).
Even by investing two-and-a-half times more than Ram, Shyam has managed to build a corpus which is 43% less. This happened because Ram started investing earlier. This allowed the money to compound for a greater period of time.
Also as the corpus grows, the impact of compounding is greater. Ram as we know had managed to accumulate Rs 8.77 lakh after ten years and then he stopped investing Rs 50,000 every year, allowing the accumulated corpus to compound for 25 more.
After this, due to financial constraints Ram is not able to invest Rs 50,000 every year. But at the same time he does not touch the money that he has already accumulated, hoping to live of it when he retires.
He lets the Rs 8.77 lakh grow and assuming that it continues to earn a return of 10% every year, he would have been able to accumulate around Rs 95 lakh by the time he turns 60. So the Rs 5 lakh (Rs 50,000 x 10 years) he had invested in the first ten years has grown to Rs 95 lakh: even though Ram stopped investing Rs 50,000 every year after the first ten years.
Now let's take the case of Shyam. During the first few years of his life Shyam enjoyed life spending money on all kinds of things rather than invest regularly. At the age of 35 reality suddenly dawns on him and he starts investing Rs 50,000 every year. He invests this amount every year till he turns 60, i.e. for 25 years. Assuming he also earns a return of 10% per year on his investments. At the end Shyam would have managed to accumulate Rs 54.1 lakh.
Even after investing Rs 50,000 regularly for 25 years, Shyam has managed to accumulate Rs 54.1 lakh, which is around Rs 41 lakh less in comparison to Ram. Now Ram has invested only Rs 5 lakh over the ten years he invested. In comparison, Shyam over the 25 years has invested Rs 12.5 lakh (Rs 50,000 x 25 years).
Even by investing two-and-a-half times more than Ram, Shyam has managed to build a corpus which is 43% less. This happened because Ram started investing earlier. This allowed the money to compound for a greater period of time.
Also as the corpus grows, the impact of compounding is greater. Ram as we know had managed to accumulate Rs 8.77 lakh after ten years and then he stopped investing Rs 50,000 every year, allowing the accumulated corpus to compound for 25 more.
See... this is as simple as that... by allowing time to take its course in your investment.. then you may end up being a millionaire. That is the magic of compunding- More time, much more the money.
The best part about investing early is that though at the age of 35 + you do have a lot of responsibilities at your head... with a wife, few kids and aging parents... but you might just be able to still fulfill a dream of yours... coz even if you are investing now for the coming 10 years in say a safe Public Provident Fund... where you are allowed to invest upto 70,000 rupees a year at 8% interest... for a period of 10 years would give you enough money to get going with that start up.
If you really are interested in investing early... and wanna an estimate of how things would go if start investing at various ages... here is a calculator that'll help you...see... now you'll be able to make just the decision that you have been wanting to... whether to invest now or a few years later... I know I am bad at making decisions on investment... I recently got my pan card and my dad is making the effort... so I am helping myself and people like me through these series of articles to understand how money can be made into more money... here is an Investment IQ test that may point you if you n I need proffessional asset managers or we can do without having one..I need some serious help... as per the calculator...
My advice...
Start Investing now so that you have millions for tomorrow..... Make the Money work.... just like you work for it...!!!
