Who doesn’t want to build a tidy sum of wealth over the years? But you probably are unsure where and when to start.
The simplest product gives the highest return
It’s easy to get confused in the din out there – ULIPs, ‘child plans’, ‘pension plans’, chit funds and even the neighbourhood ‘aunt’ peddling an LIC policy. These complex products are poor investments.
There is no better wealth creation engine than the equity market. Equity markets give 15%-18% annual returns over the long term. And a mutual fund is the best vehicle to invest, for those who don’t understand the markets.
A monthly automatic investment in a mutual fund (called SIP) ensures you put away money regularly for the future. You can start as low as Rs 500 per month. Technology allows you to provide a bank mandate and automatically transfer money on a fixed date every month. The money, should you need it, can be withdrawn online at a day’s notice.
The time to start is now!
If you had invested Rs 5K every month starting 2001 right through 2015, you would have invested Rs 9L in all. Can you guess what this would be worth today – Rs 75L – that’s over 8X growth!
If you had delayed starting by just a couple of years (2003 instead of 2001), your wealth would be less than Rs 35L. In other words, the punishment for starting late is severe.