Money tip: What difference can a year make? A whopping Rs 13.43 lakh!

We often tend to undermine the importance of time. That’s what probably led to the birth of procrastination, which has become a part of all our lives now. Important or not, most people tend to delay things till they become absolutely necessary. However, in the world of investments a period as short as a year can make a lot of difference to your wealth.

In the world of investments a period as short as a year can make a lot of difference to your wealth. Source - PTI.

We often tend to undermine the importance of time. That’s what probably led to the birth of procrastination, which has become a part of all our lives now. Important or not, most people tend to delay things till they become absolutely necessary. However, in the world of investments a period as short as a year can make a lot of difference to your wealth. For example, you will be surprised to know that an investment made for 24 years could have grown by another Rs 13.43 lakh had you started a year earlier or stayed invested for an extra 12 months. Yes, that is a lot of money to let go of.

To simplify, let us assume that you started a SIP of Rs 7,000 per month and stayed invested in the mutual fund for 24 years. If the interest remains 12 per cent on average, the eventual return will be Rs 1,04,59,750. Most investors would just be happy with the fact that they have become a crorepati by investing just Rs 7000 per month.

Rs – 7000 per month

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Tenure – 24 years

Interest – 12 per cent

Return – Rs 10459750

However, a simple calculation shows that if you had started investing a year earlier than your actual date, the returns at the end of a 25-year tenure would have stood at Rs 11803446. This would be a difference of Rs 13,43,696.

Rs – 7000 per month

Tenure – 25 years

Interest – 12 per cent

Return – Rs 11803446

However, all of this is possible only when all the conditions assumed remain true for the investment period. But, it once again underlines the importance of starting the investments at the right time and also withdrawing the money when the time is most advantageous.

This is another reason why SIP has emerged as one of the better investment options. It reduces market risk and allows the comfort of creating a big pool of money by making small investments.

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