A businessman called his twin sons, Ajay and Vijay, who are about to turn 25 the next month, to his office.He offers them Rs.10000/- as pocket money every month and leaves them with the choice of how they would want to use this money.He gives them one piece of advice .†My sons, always remember the magic of investing early.
Ajay is a smart young man who understands the importance of saving for the future.He joins an advertising agency and starts investing his pocket money of Rs.10000/- every month through Systematic investment plan(SIP) in equity market.
Vijay on the other hand , likes to enjoy his entire life to the fullest and spends his pocket money on movies, parties and entertainment with friends.He continues spending his pocket money recklessly without thinking about his future.
Exactly five years later, their father calls both the sons and asks them what they did with the money.Ajay proudly informs his father how he invested the Rs.10000/- for the last five years and how he plans to remain invested till he turns 45 years old.Vijay, on the other hand , is empty handed and is embarrassed with his casual approach towards his future.
Following his brother’s footsteps, Vijay joins the sales office of a reputed company and also starts investing Rs.10000/- at the age of 30.
Ajay and Vijay celebrate their 45th birthday with a get together party.Their respective families and relatives are also there.
Ajay announces his plan to go on a world tour with his wife.Vijay is zapped.Ajay reiterates, “ Remember father’s words- the magic of investing early.The sooner you begin investing, the more time your money will have to grow. You delayed your investments by five years and that’s what made a big difference.
See how investing early can make a difference to your investment:
| Ajay | Vijay | ||
| Starts investing at the age of | 25 years | 30 years | |
| Invests till the age of | 45 years | 45 years | |
| Number of years investment done on a monthly basis | 20 years | 15 years | |
| Number of installments in months | 240 months | 180 months | |
| Monthly investment amount | Rs.10000 per month | Rs.10000 per month | |
| Date of investment | 1st of every month | 1st of every month | |
| SIP for 20 years | SIP for 15 years | Difference of 5 year delay | |
| Principal invested | Rs.24,00,000 | Rs.18,00,000 | Rs.6,00,000 |
| Scenario 1 Period of investment | 1 March 1993 to 1 February 2003 | 1 March 1998 to 1 February 2003 | |
| Value of investment as on March 2003 | Rs.88,29,344 | Rs.31,65,198 | Rs.56,64,147 |
| Scenario 2 Period of investment | 1 March 1989 to 1 February 2009 | 1 March 1994 1 Feb 2009 | |
| Value of investment as on March 2009 | Rs.75,19,971 | Rs.34,98,423 | Rs.40,21,548 |
| Scenario 3 Period of investment | 1 March 1992 to 1 February 2012 | 1 March 1997 to 1 February 2012 | |
| Value as on 1st March 2012 | Rs,88,18,592 | Rs.55,16,959 | Rs.33,01,633 |
The earlier you begin investing, the more time you will have to grow. If you delay, you may have to invest much more to achieve a similar result.
It’s up to you now, whether you would like to act like Ajay (the disciplined brother) or Vijay ( the spender).