Fill the vessel drop by drop
Investment in equity i.e. shares is still looked upon with apprehension in our country. If you really want to make a big capital, then there is no better way than the stock market. Even a small investment made carefully over a long period in equity becomes a big amount in any case. Usually people think that a big amount is needed to invest in shares. But this is not completely true. If a certain amount is invested in the market for a fixed period, then a big amount can be obtained through it.
How to make capital
It is not very difficult to make a big amount by investing small amounts in the stock market. Suppose, you earn 40 thousand rupees a month. You can invest 10 percent of your total income. You can invest your money for 30-35 years. In such a situation, a big amount will be available to you till your retirement. If you are 25 years old and want to retire at the age of 60, and 3-4 family members are dependent on you and your monthly expenditure is around 25 thousand rupees. In these circumstances, if you want to make a large amount by investing in equity, then for this you will have to work on a good plan.
Make an investment plan
You have to collect money for your retirement. Since your age is not very high now, you can invest in equity. Let’s assume that you can invest 5 thousand rupees per month in a diversified equity mutual fund. You can make this investment till the age of retirement. However, you can also change it later. But let’s assume that you will keep investing this money in this fund till retirement. Since you are investing for 35 years, the risk in this investment is very low. Even though this investment is being made in equity, the risk will be considered low there. In the stock market, a lot of risk is on short term investments only. For a long period like 35 years, it is not risky at all. In this you can get very attractive returns.
If we take the Sensex only, then in the last 30 years i.e. from 1979 to 2009 it has given a return of 15 to 17 percent. In such a situation, if you are investing for the long term, then you can consider at least 15 percent return as safe. Now let’s come to the main point. Investors may face difficulty in investing such a huge amount in the initial years. Later their responsibilities will keep on increasing, but as the career progresses, the salary will also increase and investing 5 thousand rupees monthly will not be that difficult.
How much will be the investment?
You can invest 5 thousand rupees every month. This means that you will invest 60 thousand rupees in equity every year. Since you have to invest for 35 years, it means that you will deposit 21 lakh rupees in 35 years. Let us assume that you will get an average return of 15 percent on this. In this way you will get 3 lakh rupees more. In this way you will get a total return of 24 lakh rupees. Now if we calculate the return by adding this interest rate, then at the rate of 15 percent this amount also becomes around 24 lakh rupees. Let us assume that you will get a total of 50 lakh rupees. This estimate has been made on the basis of simple interest rate only. Usually people think like this, but it does not happen. In this, the formula of annual compound interest has not been adopted, rather it is a simple calculation, which anyone can do.
The miracle of compound interest rate
But interest is not calculated like this. If you calculate it on the basis of compound interest rate, your amount will turn into crores. According to the correct calculation, he will have around 7.43 crores rupees. You must be thinking how is such a huge amount possible! This is the miracle of compound interest rate. Interest is earned on interest and it keeps on increasing. In the beginning, the interest seems very less, but with time this amount keeps on increasing and after a long period like 35 years, this amount will seem unbelievable to you. Would you believe that if you invest 5 thousand rupees, you will get almost 1 crore rupees only in interest after 35 years, which is four times the original amount invested by you. All this is the magic of compound interest. That is why the great scientist Albert Einstein had declared compound interest as the eighth wonder of the world.
Enjoy after 10 years
If you cannot bear the pain of investing for a long period like 35 years, then it is okay. You can invest for 10 years and get freedom. After investing 5 thousand rupees per month for 10 years, that amount will grow at a large amount for the remaining 25 years at the rate of compound interest. In this case, you will have only 2.12 crore rupees, which means you will get 5.88 crore rupees less than before. There is a solution, if you want to get the same 7.43 crore rupees after 35 years even after investing for only 10 years, then you will have to increase your monthly investment a little. You will have to invest 1,420 rupees more every month. That means invest 6,420 rupees monthly for 10 years and leave it to grow for the next 25 years. Then your wealth will become 7.43 crore rupees.
The more burden in the beginning, the more comfort later
From this, you must have understood one thing that the more pain you bear in investing in the first years, the more benefit you will get later. In the initial years of career, a person is also in a position to invest more, because then the responsibilities are less and there are also fewer dependent members. If someone invests more, he takes the investment screenshot and also makes the same amount. If you think that this opportunity of investment was there 5, 10 or 20 years ago, then do not worry. There is still an opportunity.
Read Also:
- How Is Technical Analysis Done In Stocks
- Always Keep These Things In Mind While Investing
- What Are The Basic Principles Of Investment
- What Is Circuit And Value Averaging
- Investing In Shares Can Be Safe
- Investment Options
- Stock Market Story
- History Of Finance
- Key Finance Terms
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