Today, let me talk about the most important habit that everyone should build as early as possible in life.
It is the habit of Saving and Investing!!
I was lucky enough to start earning small sums of money at the age of 21 and started investing in stocks as I had some exposure to stock market due to my family background.
Recently, I came across an illustration by L&T Financial services mutual fund and the numbers were quite astonishing to say the least. Here are the details -
Before that, 4 days back we released our New Stock Recommendation for Alpha and Alpha + Members
It's a minerals processing company, largest in its segment, has captive raw material sources, grown PAT by ~300% in the last few years, de-leveraging balance sheet, 2nd generation promoters and available at only ~6 times post-tax earnings.
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The impact of compounding and why it's important to start saving and investing early
Source: L&T Financial services mutual fund
As can be seen in the picture above, there are 2 investors - Mr. A and Mr. B.
Mr. A starts saving and investing at an early age of 25. He does so with a small amount of Rs 5,000. Assuming he keeps investing only Rs 5,000 monthly till the age of his retirement, he amasses a wealth of Rs 3.24 crore at an assumed rate of return of 12%.
Against the same, Mr. B starts late at 40; however to compensate for the late start he invests 3x the amount, i.e. Rs 15,000 monthly. However, despite investing 3x the amount of Mr. A, Mr. B amasses only Rs 1.49 crore by his retirement age.
It is truly astonishing to see the power of compounding over longer periods.
Thus, the right age to start investing is probably as soon as you start earning. While there's no fixed formula, aim for saving and investing at least 10% of your income.
SEBI Research Analyst Registration No. INH100001690
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Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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