Wealth is largely the result of habit.
—John Jacob Astor
Let me reveal to you some calculations that can prove to be a game-changer for you. fte goal-cost figures entered in the table is based on an assumption, you can enter the number as per your target goal.
Let’s assume that you have a goal to get Rupees. 5,00,00,000/- after 20 years. Rate of Return to be assumed as 15%. To achieve your goal, you need to start your monthly SIP for Rupees 18,794/- which needs to be increased every year 10%. The illustration given below explains the concept.
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Suppose you wish to accumulate an amount of Rupees five crores in the next twenty years. Assume the potential returns to be 15% per month. Now, if you have to invest monthly, there can be two options:
Option A: If you start investing Rs. 32,983/- per month for 20 years. You will able to accumulate your desired retirement corpus.
Option B: If you start investing Rs. 18,794/- per month and increase the SIP amount by 10% every year and you will be able to accumulate your desired retirement corpus.
Example
You want to set-up a wealth creation fund, and you have decided to start a SIP of Rs. 10,000/- per month for 15 years and also want to increase the SIP by Rs. 2,000/- every year. The wealth creation fund can earn 12% per annum. Calculate the total fund accumulated at the end of the 15th year. The illustration given below explains the concept.
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The table above justifies all the statements of the Power of Compounding - a meagre amount of Rupees 10,000/- per month for 15 years at an annualized growth rate of 12% accumulates to a humongous number of approximately Rupees 1 crore! Isn’t that astonishing? Isn’t this the dream that you have been longing for lacking the right direction?
A tool to Use While Investing To Be a Rich Person
There are so many tools and combinations that I use while assisting my clients in investing their money. However, offering in- depth knowledge here could become a lengthy process and involve some technicalities. So, let me simplify the process by sharing the first tool that is a gateway to the riches.
One of the pronounced tools that I recommend to my clients is SIP; Systematic Investment Plans.
Under this plan, you give standing instructions to your bank for a specified period.
- SIP tool provides an average on your investment costs: As markets are volatile, whatever you invest through mutual funds is also sceptical of ups and On the other hand, while investing regularly every month, you average out the cost of buying. When the markets are low, you buy more units. When the markets are high, you buy less. In light of these options, you are equipped to beat the market effectively. Indeed, this is one of the best and proven tools.
- SIPs allow you to start as low as possible: Investing in a mutual fund can look like a daunting But when I said only Rs. 2000/- every month, a lot of my friends get interested. It’s like skipping dining out once during the month and investing that money in your monthly SIP. It also gives the flexibility to invest in small amounts as per the goal.
- SIPs give you easy flexibility and you can have many You can start SIP on a particular date like the 1st of every month. Stop it if you cannot honour it. Cancel and restart it if you are not comfortable.
- SIPs bring great investing discipline: I educate my clients to make this as a part of their discipline from day ftey like the disciplined approach that gives them a great habit as well. In this manner, relieves them from the worries of market fluctuations.
- SIPs are potent tools for wealth creation: So you can start investing in any Over some time, the value of your investment grows in a compounding way.
- SIPs assist in the achievement of all goals: All the goals of our clients are mostly on a SIP Slowly and over a long period, each goal starts getting achieved. This power of habit and seeing your money grow is a dynamic factor. These factors motivate my client to invest over a long period.
- SIP gives flexible, powerful methods to invest: I generally use this illustration to prove to my clients:
Let’s assume you want to create a retirement corpus of Rupees five crores, and you want to know how much you need to start investing per month for 20 years if your investment returns 15% per annum
Example
Mr Suresh Sharma decides to start a SIP of Rupees 10,000/- per month for 15 years for his son’s education goal.
He expects to make a 10% increase in his SIP each year that gives him a 12% return per annum. What will be his corpus at the end of the 15th year? Let’s understand this with the help of the chart below.
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Therefore, SIP is one channel that I suggest to most of the clients based on their earning. And this has spawned remarkable results so far.
Now, let us learn about the 2nd Investment Tool- STP.
Taressh Bhatia is a CFPCM 
CERTIFIED FINANCIAL PLANNER CM and is the founder/partner of Advantage Financial Planner LLP – A firm Registered with SEBI (Securities and Exchange Board of India) as RIA (Registered Investment Advisor).
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