Have you
started saving in early age?
Whenever I meet around 25-35 age of group and ask about saving and
investment, they often don’t have clear view on this subject. For investment
they totally depend on family, friends and relatives and friends. Most of them
invest in traditional asset class like fix deposit, gold and real estate. Apart
of this they even not bother about to know any other asset class. Every asset
class has some virtue and drawback and not all asset class always suitable to
all person anytime. Before and investment decision you should have proper
knowledge about all available options.
I have discussed about many financial products in my earlier posts but
today I want to discuss about the advantages of early saving. However, most
people start investment after marriage or kids without realizing that they have
started late. Here I share one example for understand the early saving concept.
Two friends - Sachin and Mohit are of same age group of 35 and working in good
reputed companies. One day they meet and discuss about family, future and
finances. After discussion they were not able to arrive on a definite saving
figure which was needed to save for their future. They had contacted their
common friend Arvind, a financial planner and met him in his house on one Sunday.
Sachin had started SIP of Rs 5,000 every month in a good equity scheme 9 year
back when he was 26. Mohit had done the same thing but he has done it 5 year
back when he was 30. Now the present value Sachin’s investment is 10.16 lakh whereas
Mohit’s current investment value is now 4.19 lakh only. Both had invested same amount in same scheme but the only difference is
time. Mohit had started after 4 year from Sachin’s investment and the
difference in front of you.
Now they are planning for retirement at the age of 55 after 20 year. If
they continue the same amount every month in the same scheme, at the time of
retirement Sachin will get from scheme 1.91 (approx 2 Crore) and Mohit will get only 1.12 Crore. The difference in their amount is due to the delay cost of investment
mere 4 year only. If Mohit could start with Sachin then he would also get the
same amount 1.91 crore.
Now you people will think either these figure is wrong or there are some
mistake. It is due to the power of compounding. Regarding ‘power of compounding’
renowned scientist Albert Einstein once said “Compound interest is the eighth
wonder of the world. He, who understands it, earns it. He, who does not, pays
it.”
Always remember my friends, time is the most important element in any
investment. The investment amount does not matter whether it is small or huge.
Starting investment in early age make different from those who start invest
late.
If you have doubt about the
numerical value in this post and want more information regarding investment or
you need investment services, feel free to ask us. We also conduct the seminar
on investment and financial planning. If you are interested for seminar in your
city just drop the mail.
Warm regards,
Arvind Trivedi
Certified Financial Planner
