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Cost of Delay in Investments

Almost all of us want to invest towards our long term goals like retirement, house purchase etc., But only few of us manage to start the investments and getting with it. Many postpone the investment waiting for a more convenient or appropriate time, based on their own cash flows or market valuations.

The downside of that is the huge difference it creates at the end of the investment term. Take for example, Guy1 starts investing Rs10,000 per month from the age of 25 and continues till the date of his retirement, that is, 60 years. Guy 2 starts at the age of 30, and continues till the age of his retirement, 60 years.

Total amount invested by Person 1 = 12*35years*Rs10,000 = Rs42,00,000

Total amount invested by Person 2 = 12*30years*Rs10,000 = Rs36,00,000

The difference in amount invested is Rs6,00,000, which is not very big you would assume. But look at the corpus each one of them ends with at the age of 60.

Power of Compounding
Starting at
25 years
Starting at
30 years
Monthly Savings
Rs10,000
Monthly Savings
Rs10,000
Rate of Return
12%
Rate of Return
12%
Value at Maturity (60 years)
Rs5.45 crores
Value at Maturity (60 years)
Rs3.05 crores

Person 1 = Rs5.45 crores
Person 2 = Rs3.05 crores

The difference is almost Rs2.4 crores or 40% of Guy 1 corpus.

Person 1 does better due to the “Power of Compounding”. Guy 1 gets extra 5 years for his investments to grow and it results in a 40% additional corpus at the time of retirement. You know what is the cost of delaying the investments.

Therefore, it is very important to start the investments as soon as possible. For young people, in their first job, you start within the first 6 months of joining the workforce. You can start with a small amount as low as Rs1000 and keep increasing as your salary increases.

For people who are employed for a longer time, don’t wait for an appropriate time. Just go ahead and start it today.

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