Wealth Creation: Here’s why investing in long-term can prove to be beneficial for you

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© Sangita Jain Wealth Creation: Here’s why investing in long-term can prove to be beneficial for you

One of the basic tenets of creating wealth and fulfilling financial goals are investing for the long-term. . It may not attract many individuals but having a long-term vision coupled with regular investments can help you in building a large corpus.

Consider this- there are four individuals who decide to invest every month till they hit the retirement at 60. Their current age is 20, 30, 40 and 50 years. Each one of them decides to invest Rs 1,000 per month in an equity mutual fund offering 12 percent rate of return per year. Here is how their corpus would look like when they will retire.

It is noteworthy that all of them received the same rate of return – 12 percent per annum. The 20-year-old took advantage of power of compounding and saw his money grow for 40 years. Evidently, the longer you let your money work hard, the more money you take home. If you keep investing your monthly commitment, you will walk away with a large sum.

Let’s make a small change to this calculation. The 30-year-old invests for five years and then decides to cash out. In that case, he will invest only Rs 6 0, 000 and he will take with him Rs 8,1103. What if he chooses not to liquidate his investment but does not invest more after the end of five years? He just let’s his money compound till he retires. He would still leave with a retirement corpus of Rs 13.78 lakh. Not a bad deal.

The two major takeaways from the numbers are—magic of compounding and focused investments. Thus, investors should plan their investments with a long-term view to create wealth.