Simple Things That Matter More in your Wealth Creating Journey
1) How much you save matters more than how much you earn. The story of Ant and Cricket shows that saving first and limiting expenses allows one to retire earlier with more savings. 2) How you invest matters more than how much you save. Investing the same amount for longer periods and in appropriate assets based on goals and horizon can significantly impact returns. 3) How long you invest matters more than how big you invest initially. The power of compounding allows smaller initial sums to grow substantially over longer periods due to incremental gains. 4) How you manage your investments matters more than market performance. Sticking to a plan without overreacting to markets typically leads to returns closer to the market versus lower returns from
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Simple Things That Matter More in your Wealth Creating Journey
- 1. Hornmerchant ® Simple Things That Matter More in your Wealth Creating Journey • How much you save matters more than how much you earn • How you INVEST matters more than how much you save • How LONG you invest matters more than how big you invest • How you behave (perform / manage) with asset classes and markets matter more than how the asset classes and markets behave (perform)
- 2. How much you save matters more than how much you earn. Two friends…Ant and Cricket… Cricket spends first on his needs & wants and tries to save if anything left after spending. Ant calculates, how much retirement corpus he needs and how much he should be saving every month to accumulate that corpus. He saves first as much possible first and tries to limit his expenses on ‘needs’ within what is remaining. Ant retires early and has more than he ‘wanted’ in life. Cricket continues to work on a contract job after retirement for the money needed for his ‘needs’. Income – Expenses = Savings Hornmerchant ® Income – Savings = Expenses
- 3. How you INVEST matters more than how much you save Hornmerchant ® for @ 8% 13% 10 Years ~ 2.2 L ~ 3.4 L 15 Years ~ 3.2 L ~ 6.3 L 20 Years ~ 4.7 L ~ 11.5 L ₹ 1 Lakh Invested Choose Investments appropriately in line with your Investment Horizon / Goals
- 4. How LONG you invest matters more than how big you invest Hornmerchant ® Image Courtesy: wikihow.com So, time is more important; allow your investments to grow and benefit from the power of compounding! ₹ 1 Lakh Invested @ 13% for 5 Yrs 10 Yrs 15 Yrs 20 Yrs 25 Yrs Would Grow to ~ 1.8 L ~ 3.4 L ~ 6.3 L ~ 11.5 L ~ 21.2 L Total Gain ~ 0.8 L ~ 2.4 L ~ 5.3 L ~ 10.5 L ~ 20.2 L Incremental Gain ~ 0.8 L ~ 1.6 L ~ 2.9 L ~ 5.2 L ~ 9.7 L Gains increase disproportionately with every increase in the investment period! ₹ 1 Lakh Invested for 20 Years grows bigger Than ₹ 2 Lakh Invested for 10 Years! @ 13% 10 Yrs 20 Yrs ₹ 1 Lakh ~ 3.4 L ~ 11.5 L ₹ 2 Lakh ~ 6.8 L ~ 23 L
- 5. How you behave (perform / manage) with asset classes and markets matter more than how the asset classes and markets behave (perform). Hornmerchant ®Image Courtesy: legisone.com Aug 2013 Aug 2018 CAGR BSE Sensex Level (Pts.) ~ 19,000 ~ 38,000 ~ 15% Large Cap MF Cat. Avg. - - ~ 20% An Investor Returns - - ~ 10% Investment Return Investor Return BEHAVIOUR GAP Don’t fiddle with your investments too much! Market has always rewarded the patience and penalized the over-action!