45 and no SIP yet? See how it can help even now for retirement
Personal finance investment experts always advise that one should start their investment journey as early as possible. However, millions of people in India don't follow the advice and instead spend years in smug indifference until their forties when realisation dawns making them scamper for high-yielding investments.
Kolkata: Better late than never is an adage that is frequently applied to the world of personal finance. It often so happens that millions don't care to invest early in life and spend their twenties and thirties in smug indifference till they reach their forties. But often once in their forties, realisation dawns on them and the scamper to find high-yielding instruments to put together a corpus which can sustain them after retirement.
But then, better late than never. Calculations show, if one starts investing even at the age of 45, with discipline, one can actually put together a corpus which is not insignificant at all. For example, let's consider investments in mutual funds in the form of SIP or systematic investment plans.
SIPs work on the principle of compounding and rupee cost averaging, which harnesses a giant force with the passage of time. One can easily have a look with an SIP calculator. Let's get down with the numbers.
What is Rs 10,000 SIP for 15 years
Let's take the example of an individual who wakes up to the need of investing at the age of 45. He or she can invest Rs 10,000 a month for 15 years (ie, till he/she reaches the age of 60). Let's assume that the return generated by the SIP is 15% annually, which is provided by many equity-linked funds. Any SIP calculator will tell you that if the SIPs are continued without a break, an amount of Rs 67,68,631 will be created when the person turns 60.
Now think of a situation where an individual can invest Rs 25,000 every month in mutual fund SIPs. If an individual can pursue it in a focused manner, an amount of Rs 1,69,21,577 can be generated by the SIP over a period of 15 years.
If you can increase the monthly SIP to Rs 50,000, the SIP can create a corpus of Rs 3,38,43,155, with an average rate of return of 15%. If one's finances allow the SIP to be raised to Rs 1,00,000 the pool of money that is created in 15 years will stand at Rs 6,76,86,309.
Just to have a look at how easy creating a Rs 7 crore pool becomes if one invests from the age of 25, consider the following calculation. If a 25 year-old begins investing Rs 10,000 only a month, he/she would has amassed Rs 7,00,98,206 by the time he/she turns 60. In other words, the monthly SIP is one-tenth of what a person beginning at the age of 45 would need to create by the time he/she hits 60.
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, INVITs, any form of alternative investment instruments and crypto assets.)