Is money saved greater than money earned?

Rs 10000 saved is more than Rs 10000 earned. That is because the income of Rs 10,000 is taxed and after taxes what you get on hand will be Rs 10,000 minus the taxes depending on your tax bracket. Calculate the amount of money you finally get after accounting for the taxes. So grab every opportunity to save. So start saving now!. Happy Saving.(Remember the new mantra that money saved is greater than money earned )

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Invest both time and money

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 20s and 30s 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 makes. To make this difference clear , I will use a simple example.

Case 1: X invests Rs. 12,000 per year each in RD and Equity Diversified Mutual Fund from the age of 25 to 60. The assumptions are RD gives 10% P.A and Mutual Fund gives 18 % P.A. returns.
Case 2 : Y invests Rs. 12,000 per year each in RD and Equity Diversified Mutual Fund from the age of 30 to 60. The assumptions are RD gives 10% P.A and Mutual Fund gives 18 % P.A. returns.

Though the difference in investment is only Rs. 1,20,000 and a delay of 5 years to start investing, you can see in the chart below how it can make a huge difference! Amounting over Rs 1 crore. If you find out how the value of the investment has grown over year for both person. Use the mouse to hover over the charts and how the investment has grown. The magic of compounding has worked in favour of the first person. This is due to the fact that money invested properly can potentially grow. The Total Value is the cumulative value of investment this year and investments so far. The magic of compounding is a very powerful. This goes on to show that money can gorw with time. (Although people say money does not grow on trees). But, they fail to understand that like a tree money can grow with time if invested properly. Don't you agree!!!.

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 returns of SENSEX

**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 by starting early? The earlier you start, the more you are poised to make. So what are you waiting for? Start investing today!!