It is a fad amongst
youngsters to own the latest gadgets, branded clothing etc, with the higher
disposable income this has become increasingly rampant. Saving or Investing is
a thing that is far-fetched, with limited or no financial or social
responsibility, they do not see the necessity to save or invest their funds.
Seeing is believing,
here’s an example –
|
Starting Age of
investment
|
25 years
|
30 years
|
|
Monthly Contribution
|
10,000
|
10,000
|
|
No of years for
investment
|
35
|
30
|
|
Total Contribution
|
4,200,000
|
3,600,000
|
|
Rate of Returns
|
12%
|
12%
|
|
Value at maturity
|
64,309,595
|
34,949,641
|
If we look at the above
calculation, we can easily make out that the contribution of Rs. 6 lakh done in
first five years actually gives boost to your overall wealth. The difference of
wealth creation is close to 46%.
How to save without compromising on luxuries?
As a new investor, you
should start contribution 10%- 20% of your salary towards savings. You can
start with investment in mutual funds through Systematic Investment Plan (SIP)
which allow you to invest into market with moderate amount of risk. SIP also
helps you to invest on regular basis. Systematic and disciplined approach to
investment can lead to wealth creation.
In the early stages of your
career, you can also take high risk as there is no financial or social
responsibility on you. You can take aggressive investment approach and start
investing into some mid cap funds or equity shares also, however, indulge in
them only if you have the required expertise.
During the first few years
of your career you should also start accumulating some money for your immediate
need or emergency needs. You should at least have 3 to 6 month salary as an
emergency fund. Ideally you should park this money into Liquid funds which
offer better returns than a saving bank account and you can also get the money
immediately (i.e. within 1 or 2 days).
Tax planning is also one
crucial aspect for wealth creation exercise. In order to save tax, you can
start with Equity Linked Saving Schemes (ELSS), ELSS gives you tax benefit
under section 80C. This option has lock in of 3 years which makes you a long
term investor.
Key Takeaway
Little drops of water fill the
ocean. Your small monthly savings can help you to achieve your goal of wealth
creation in big way. Next five years are for Indian stock market and you can expect 15-20% returns.
