Know How To Invest To Create Wealth

Age is just a number when it comes to starting something good; whether it is a decision to start eating healthy, exercising regularly, acquiring a new skill, or even running a marathon. So why is it that investing in a disciplined manner looks like an uphill task even at the age of forty? Most often people who start investing late think that they have missed the bus, but the reality remains that irrespective of one’s life stage, one can course correct and start investing.

Every individual has a unique life journey. For many, the initial years of their careers would be the phase of shouldering various financial responsibilities leaving little leeway for savings and investments. Just like any other tedious task, half the battle is won when an individual decides to take measures to organise one’s money matters. Today, thanks to the presence of seasoned financial planners, investors have access to guidance, irrespective of the amount to be invested or the age of the investor. A planner will ensure that you get the single most important factor correct – making the right investment.

To understand this point further let us consider two individuals - Akash and Sam. At the age of 40, both have a take-home salary of Rs.10 lakh per annum. However, both are concerned about the delayed start and the small investment corpus they have. That is when they meet Umeed, a financial planner.

Umeed assures Akash and Sam that it is never too late, nor is the corpus too small to begin investing. It is clear that both these individuals have 20 years of earning ahead of them which is enough to build a substantial corpus. Acting on the financial planner’s suggestions, both started a monthly SIP equivalent to 30 percent of their take-home salary. In general, an average Indian saves 28 percent of their earnings which is in line with the global savings average. At the end of the first year, both had invested Rs. 3 lakh each. In the following year, both receive a 10 percent hike in their salary. Post this, Akash decides to continue investing 30 percent of his revised take-home salary while Sam decides to increase his SIP to include 60 percent of his annual increment given that his expenses are not growing at the same rate.

Now let us take a look at the overall portfolios for the two colleagues at the end of the third year while assuming an annualised return of 10 percent:
A difference of Rs.17.18 lakh in investments is leading to a difference of Rs. 2.31 crore in the savings corpus. This shows that what matters is not the “when” of investing but the “how” of investing. This also shows the importance of seeking the services of a certified financial planner who can help us simplify the process of wealth creation while ensuring that the process is not compromised.

The views are personal and are not part of the Outlook Money editorial Feature

Soumyajit Ghosh, Founder, Wealthapp Distributors Pvt Ltd