People often delay investing until they reach a certain income level. Such delays can lead to poor outcomes. The best approach is to start investing as early as possible, even with small amounts. When your financial situation improves, you should enhance your investments on a controlled basis. Starting early gives you a significant advantage. Compound interest continues to grow your investments, even if you temporarily stop contributing. As more time passes, the power of compounding exponentially increases your wealth.
A person who starts investing in a step-up SIP of Rs 15,000 per month will accumulate around Rs 2.26 crore after 5 years of monthly contributions.
Your investments will continuously expand even during periods when you choose to stop making contributions.
Let’s compare two situations.
The investment from Investor A, totaled Rs 20,000 each month for 5 years after which the account would grow unchecked for the following 25 years.
The same monthly investment amount goes into the account of both Investors B and A until the 30-year period ends.
A’s total investment: Rs 12 lakh
The investment grew to Rs 16,22,072 (including Rs 4,22,072 gained) throughout the 5-year period.
The capital grows to Rs 2.75 crore during 25 additional years when earning a 12% yearly return.
B’s total investment: Rs 72 lakh over 30 years
Capital gains: Rs 5,44,19,464
Final corpus: Rs 6,16,19,463
The amount that B contributed turned out to be two times greater than what A invested but B only contributed six parts of what A contributed. Your investment during a short period of time will continue to expand substantially during the passing years. The key takeaway? The time to begin investing stands now rather than tomorrow.
How Rs 15,000 Step-Up SIP Can Grow To Rs 2.26 Crore?
Let’s break it down. Starting your investment with Rs 15,000 per month and increasing it every year by 5% is the scenario we will consider.
After 5 years:
Total investment: Rs 9,94,614
Estimated capital gains: Rs 3,35,090
Corpus: Rs 13,29,704
The investment would develop for 25 years with a 12% annual return.
Estimated capital gains: Rs 2,12,75,350
Final corpus: Rs 2,26,05,054
Compounding demonstrates its amazing properties through which beginning early investments of small amounts proves quite effective.
