Retirement Planning: How Rs 4.26 crore corpus can reach Rs 8.80 crore in just 3 years with 2% additional returns on investment
Power of Compounding: Returns that an investor gets on their investment may not appear to be significant in the short term, but when they compound over the years, they can help one create a much larger corpus compared to someone who gets slightly lesser returns.
Retirement Corpus, compounding returns: If two persons invest Rs 5,000 monthly for 5 years and get 12 per cent and 14 annualised returns, respectively, on that, their estimated corpuses will be Rs 4,05,518, and 4,26,080, respectively, on investment of Rs 3 lakh, but if they continue their investment for 25 years each, their corpus will be Rs 85,11,033, and Rs 1,17,23,201, on the same investment. It happens because of the power of compounding that reflects its impact in the long run. In this write-up, we will show the importance of high annualised returns through examples. Also, we will show, due to compounding, how your corpus can be 2X with just 3 years of additional investing if you get 2 per cent extra annualised returns.
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(Disclaimer: Our calculations are projections and are not investment advice. Do your own due diligence or consult an advisor for investment planning.)
What will be investment conditions?
We will take the examples of Rs 10,000, Rs 15,000, and Rs 20,000 monthly investment for 25 years and will show what will be the impact on corpus if you get 12 per cent and 14 per cent annualised return on these investments. The mode of investment can be SIP in mutual funds or anything where you get 12 per cent and 14 per cent annualised returns. In the second calculation, we will show the corpus can be 2x with 3 years of additional investments if the rate of annualised return is 14 per cent instead of 12 per cent.