Invest both money and time

What does this mean?

My Father often uses the phrase Time is Money. People rarely realize how true this is! It is important to invest as early as possible for the future. People in their 20’s and 30’s don’t think about investing because they think this is the time to enjoy their money. Little do they know how much of a difference it might make.

To make this difference clear , I will use a simple example.

Case 1: X invests Rs. 12,000 per year from the age of 25 to 60.

Case 2 : Y invests Rs. 12,000 per year from the age of 30 to 60.

Though the difference in investment is only Rs. 60,000, you can see in the chart below how it can make a huge difference!

But the difference at the age of 60 can be well over 70 lakhs!!!!
If he/she starts at the age of 30 and wants to get the same maturity value, he/she may have to invest Rs. 24,000 per year i.e. double the amount.

You can find how investment of Rs.1000 per month in Franklin India Blue chip fund has performed over 11 years starting from January 8th 2001 to December 8th 2011. As can be seen the investment of Rs 1,32,000 has grown to 4,85,404. In this entire period of 11 years the value of investment went below the original investment only for just 7 months of the total 132 months. In the market peak just before the financial crisis the value had gone upto nearly 5.5 lakhs. The compounded annual returns for this investment is over 22% Per Annum. The chart below is interactive and you can see the values change as you move the cursor around. Four values, price paid, market value, profit/loss and the date on which you are viewing the value are shown at the top of the chart.

I came across an interesting article on Historical average returns of SENSEX Here is the snapshot of the calculations done by the author.

**Historical average annual returns of SENSEX over a period of 20 years is 18.36%. As you can see from the above table probability of loss reduces as the time horizon increases.

Looking at these facts and figures don’t you think it’s high time to invest your MONEY by starting early? The earlier you start, the more you are poised to make. So what are you waiting for? Start investing today!! Share this valuable information with your friends as well.