Almost all of us have had our mothers imploring us to eat an extra 'parantha' during breakfast. With our mothers prompting us to eat “some more”, we've all grown up realising the value of “more is more”.
Extend this principle to personal finance to create more wealth. You will realise how adding to that systematic investment plan (SIP) or stepping it up can help you in so many ways in the future.
While celebrating ‘Mother’s Day’ on May 14 this year, let us figure out how the idea of “thoraa saa aur” has helped many reach their financial goals quite early in lives.
'Thoraa saa aur SIPs'
How does it feel once you realise that a bit of extra input will ensure greater output? However, the extra effort must be continued and not sporadic. Try this with your SIPs and you will find how stepping up your investments by even 10 percent every year can help you accumulate an enormous corpus in the long run. What looks like small and humble investments today will translate to an enviable sum that will secure your financial future.
A simple assessment of certain data underlines how the “thoraa saa aur” strategy applies to your investments too.
Take, for example, you invest ₹10,000 regularly every month in a mutual fund. Assume that it is a long-term investment that would continue for the coming two decades. The interest rate is estimated at 12 percent per annum.
Monthly Investment: ₹10,000
Rate of Interest: 12%
Investment Tenure: 20 years
translates to
Total Investment Amount: ₹24,00,000
Estimated Returns: ₹75,91,479
Total Value of Returns: ₹99,91,479
Now, let’s see how much more amount you can earn by simply stepping up your investments by 10 percent every year.
Monthly Investment: ₹10,000
Rate of Interest: 12%
Investment Tenure: 20 years
Annual Step-up of Investment: 10% per annum
translates to
Total Investment Amount: ₹68,73,000
Estimated Returns: ₹1,18,37,327
Total Value of Returns: ₹1,87,10,327
A bit of extra effort in investing in your SIPs results in a considerable difference in yields. So, next time you invest in an SIP, remember the famous “ek aur parantha” request of your mother.
