Are you studying in high school or college? Odds are you get at least a few thousand rupees as pocket money each month. Did you know that even if you invest a trifling part of this trivial pocket money, you can easily become a crorepati? Sounds exciting, no? Let us understand how you can become wealthy through your pocket money.
To become super-rich or crorepati, you just need to have two things – namely time and money.
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Time
Even though your pocket money might not be sufficient, you have time on your side. Hence, the magic of compounding is guaranteed to work in your favor. As a young person who can easily afford to stay invested in mutual funds for a prolonged duration, you can easily accumulate massive wealth over the years.
Money
To become a crorepati, you do not require chunks of money right away. Even a small, insignificant amount which is periodically invested in a systematic manner over a long period will work wonders.
Let’s understand this with an example: Say you are fifteen years old and receive Rs 2,000 per month as pocket money. You try to cut down on your spends and save a small, insignificant amount each month to invest in mutual funds. Let’s assume the equity funds you invest in are expected to fetch returns around 12% annually. You continue investing in these mutual funds till you turn 60 years of age. How much would you have by the end of the tenure? Let’s understand this with two instances. Suppose you invest Rs 1000 each month. Using the SIP calculator, you’d find that at the end of the tenure you would have accumulated around Rs 2.1 crores. Had you even invested a small amount of just Rs 500 per month, you can turn to a whopping Rs1.1 crores over the said duration.
Investor often make a rookie of not taking inflation into account. Inflation is a monetary phenomenon that drops the purchasing power of money. Inflation can greatly affect your total. So always make a habit to check your returns post adjusting the inflation returns. Nowadays, a lot of SIP return calculators offer the inflation-adjusted button. Just click on it and voila, you’ll get the true value of your mutual fund investments. Even if you assume the annual rate of inflation at 6% p.a, you would accumulate around Rs 27.7 lacs had you invested Rs 1000 per month. And if you had invested a trivial amount of Rs 500 per month, you would end up with Rs 13.8 lacs at the end of the tenure. That’s a huge decline in the numbers.
However, you should not fret. The fact remains that typically one does not stay unemployed for their entire life. If you keep growing your SIP investment amount every year as your income increases, becoming a crorepati is possible much earlier. A top-up SIP helps you increase your SIP investment by certain percentage or number each year.
So, while you continue to do the things that are considered usual for your period, do not forget to start something “unusual” like mutual fund investments in SIP. Who knows, it might procure you something cool one of these days. Like a Crore. Happy investing!
