THE IMPORTANCE OF STARTING EARLY AND COST OF DELAY:

If you have been following Indian cricket closely, you will agree that the team led by passionate Sourav Ganguly started putting some incredible performances from 2000-01. The series where India beat invincible Aussies led by legendary Steve Waugh was the defining moment of changing fortunes of Indian cricket. What really led to this change? Sourav Ganguly and Indian team management started believing in youngsters rather than unfit senior players. Changing eras, changing strategies. FDs were reasonably attractive till early 2000s but now you have no alternative but to invest in equities. The champion opening pair of Sourav Ganguly and Sachin Tendulkar was instrumental in ensuring Indian victories rather consistently. In the same manner you need to start early and start well. Delaying your retirement planning is absolutely dangerous when you stop working.

Let’s take an example to see the cost of delaying your retirement planning:

Mr. Aware  who is 28 starts Systematic Investment Plan i.e. SIP in a diversified equity mutual fund of Rs. 5000 per month. He continues his investments till his retirement age of 58 years. In nutshell, Mr. Aware puts in 18 lakhs rupees (5000*12*30). Assuming he earns 15% compounding returns his corpus at the age of 58 would be approximately 3.5 crores. 

We have another fellow, Mr. Extra Aware who doesn’t believe in saving and investing. Hence he delays his retirement planning but suddenly wakes up when he is 48 and stars putting Rs. 15000 per month via SIP for 10 years. So Mr. Extra Aware also invests Rs. 18 lakhs (15000*12*10). Assuming he also gets 15% compounding returns, can you guess what corpus he is able to generate…………

Approximately 41.80 lakhs.

Surprise, surprise!!! And a nasty one, isn’t it?

Ladies and gentlemen, in the compounding formula time is the most important determinant of what will be the end value. But we focus on the amount to be invested and rate of returns. Warren Buffett started investing when he was only 11 years old and he said I wasted 11 years of compounding. 

So when are you starting your retirement planning?

Happy Investing !

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