Conclusion

Conclusion

Before starting investing, your priorities should be on earning, savings, insurance, and emergency fund.


No matter how much amount you invest but if you don’t have these four things adequately managed, you may face financial crises in your life.

Now… You may have thought that hey, Anuj, you have not taught us about creating wealth. Let’s see what can happen if you are good at understanding numbers.

Let’s say. If you are a conservative investor, and that’s the reason, as we discussed, large-cap and hybrid funds are the best options for the conservative investor. If you invest assuming $1000 in a large-cap or hybrid fund and after ten years of investment, you will get an 8.22% return, then the value of your invested amount would be more than $2268.68.62. After 20 years, the amount would be more than $5146.90, and after 30 years, the amount would be more than $11,676! Sounds great, right? That means if you invest $10,000 in a large-cap fund for 30 years, you will become a millionaire.

Let’s take another case: Here, you have the moderate risk-taking ability. And you invest in an index fund. The invested amount is the same $1000. Here, after ten years of the investment period, you can expect 8.5% return. So the value of your investment would be more than $2332.65. After 20 years, the amount would be more than $5411.24. After 30 years, the amount would be more than $12,692.50. That means if you invest $10,000 in an index fund for 30 years, your investment value would be more than $1.2 million.


The last scenario is the highest risk taking ability, and hence you invest in stocks, thematic or sector fund. The invested amount is again the same 100k INR. You can expect a 12% return. After 10 years of the investment period, the value of your invested amount would be $3300.39. After 20 years, the amount would be more than $10,892. After 30 years, the amount would be more than $35,949. That means if you invest $10,000 in a sector fund for 30 years, your investment value would be more than $3.5 million. MIND-BOGGLING…

ISN’T IT?


Another thing I want to tell you is “START SYSTEMATIC INVESTMENT PLAN” as soon as possible.

Let’s understand the importance of SIP with NUMBERS.


If you have just started your first job, and you don’t have much responsibility, then invest at least 30% of your monthly income in any equity fund every month based on your risk-taking capacity.

If you are married and have many responsibilities, you should invest at least 10% of your monthly in equity mutual funds.


Assuming that you have a good job and you can invest $100 every month.


If you invest $100 a month for 30 years, your total invested amount would be $36,000. At the end of 30 years, the value of your $36,000 would be more than $100,900 considering 6%.


If you invest $100 a month for 30 years, your total invested amount would be $36,000. At the end of 30 years, the value of your $36,000 would be more than $150,000 considering 8%.


 If you invest $100 a month for 30 years, your total invested amount would be $36,000. At the end of 30 years, the value of your $36,000 would be more than $227,932 considering 10%.


If you invest more, you will easily create a huge wealth in the long run and achieve financial freedom.


That’s huge!!!!


So, this is how we can understand the POWER OF COMPOUNDING.


Another golden tip is the rule of 72.


What if I tell you your invested amount will be doubled in X years. This thing is called the rule of 72.

What you need to do is assume the rate of return and do the simple math. 72/rate of return. The answer which you get is the TIME in the year to double your money.


For instance, 3% is the rate of return. Here we will get 6 years by doing 72/3. What that means is your invested amount will be doubled in 24 years.

Considering a 5% rate of return, it would take 14.4 years to double your money.


Considering a 7% rate of return, it would take 10.28 years to double your money.


Considering a 9% rate of return, it would take 8 years to double your money.


Here we are done with this course. I hope you have enlarged your skill of personal finance by doing this course. Please give me a 5-star rating if you learn valuable lessons.

Thank you so much for joining this course.

Lesson Content