INVESTMENT MANTRA- A Worthwhile Lesson

“Never depend on single income. Make investment to create a second source.” – Warren Buffet

Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in future. So, invest your money because you’re going to need much more than you think.

When to invest:

It’s not your salary that makes you rich; it’s your spending habits. Wise spending is part of wise investing. It’s never too late or too early to start. The 4 keys that could guide you regarding when to invest are:

1.     Start investing early- Start early and retire rich.

2.     Invest regularly- Invest regularly and methodically and let the magic of compounding work for you.

3.     Never time the market- Be a smart investor. Always invest in time but never try to time the market.

4.     Be patient- The longer the investment horizon, the lesser is the risk and greater are the returns.

In investing money, the amount of interest you want, should depend on whether you want to eat well or sleep well. Your financial circumstances will change over time, but you can alter how you invest to suit your needs. Whether that is investing a lump sum as and when you have built up a reserve of savings or by investing a smaller amount in a monthly savings plan; if you have the money available, you could start straight away – the sooner you invest, the longer time it has to grow.

Seeing is believing, here’s an example –

Starting Age of Investing                                       25 Years                             30 Years 

Monthly Contribution                                            10,000                                10,000

No of Years for Investment                                    35                                       30

Total Contribution                                                  42,00,000                           36,00,000

Rate of Returns                                                       12%                                    12%

Value at Maturity                                                    6,43,09,595                      3,49,49,641  

If we look at the above calculation, we can easily make out that the contribution of Rs. 6 lakh done in first five years actually gives boost to your overall wealth. The difference of wealth creation is close to 46%.

As a new investor, you should start contributing 10% – 20% of your salary towards savings. You can start with investment in mutual funds through Systematic Investment Plan (SIP) which allows you to invest into market with moderate amount of risk. Systematic and disciplined approach to investment can lead to wealth creation.

In the early stages of your career, you can also take high risk as there is no financial or social responsibility on you. You can take aggressive investment approach and start investing into some mid cap funds or equity shares also, however, indulge in them only if you have the required expertise.

You should also start accumulating some money for your immediate need or emergency needs. You should at least have 3 to 6 month salary as an emergency fund. Ideally you should park this money into Liquid funds which offer better returns than a savings bank account and you can also get the money immediately (i.e. within 1 or 2 days).

Key Takeaway:

Little drops of water fill the ocean. Your small monthly savings can help you to achieve your goal of wealth creation in big way.