Many of you may want to get your money doubled in a day or in the short term, but is it possible? Maybe for quite a few ones, but not for many. In this busy life you may think of making big money by investing in stocks. However, you may sometimes even lose your money only because you may not have timed it well. Therefore, instead of going through that route one should invest one’s money through systematic investments plans.
To create wealth, one should have a purpose for investing one’s money. Investing without a purpose will not let your money grow to a certain level. Instead, you will think of booking small profits every now and then. Doing long-term investments helps your money grow multiple times. Time horizon always plays a vital role in the growth of investments without getting much affected by the market risk if side by side asset allocations are also done strategically on a regular basis.
Here are some key factors which can help your investments grow wisely:
Financial goal:
You can route your investments for a longer period of time when you have a purpose attached to it. This means that for saving money you need to define your financial goal for a given period of time. Financial goals also help you to set a defined target of how much amount you need to save from now onwards to achieve that targeted amount.
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Systematic investment plans:
This process helps your money to grow wisely over a longer period of time. Through the rupee cost averaging and power of compounding methodology, your monthly SIP amount makes it possible to grow your small savings into millions of rupees. However, the selection of schemes should be done by taking the help of a financial adviser.
Asset allocation:
To avoid the market risk and volatility, you need to do proper asset allocation of your funds from time to time under the guidance of a financial adviser. This process regulates the equity-debt ratio which helps in maintaining the sustainable growth of your long-term investments. This process also helps in maintaining the average returns which you have planned to get from your invested money. To gain from asset allocation you need to diversify your investment amount into various categories of funds.
Time horizon:
This factor has the strongest power to create real surplus wealth from your actual small savings. The longer the time period is, the lesser you need to save monthly for your goal. In fact, as the time period increases, to achieve that particular goal amount your actual savings also get reduced. Hence, your overall little savings create a good corpus at the end.
Now, let us take a look at these 5 cases that how time period helps in reducing your savings. Here we are keeping a few things constant, which is your financial goal of generating a wealth of Rs 1 crore at an assumed return of 18%.
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Case 1: Taking a time horizon of 30 years
To generate Rs 1 crore over 30 years, you need to save approximately Rs 1000 or less per month. Thus, by saving just about Rs 2.5 lakh during that period, you will be able to achieve your targeted amount. This means that your savings of Rs 2.5 lakh over 30 years helped you generate an additional wealth of Rs 97.5 lakh.
Case 2: Taking a time horizon of 25 years
To generate Rs 1 crore over 25 years, you need to save approximately Rs 2000 or less per month. Thus, by saving just about Rs 5 lakh during that period, you will be able to achieve your targeted amount. This means that your savings of Rs 5 lakh over 25 years helped you generate an additional wealth of Rs 95 lakh.
Case 3: Taking a time horizon of 20 years
To generate Rs 1 crore over 20 years, you need to save approximately Rs 5000 or less per month. Thus, by saving just about Rs 10 lakh during that period, you will be able to achieve your targeted amount. This means that your savings of Rs 10 lakh over 20 years helped you generate an additional wealth of Rs 90 lakh.
Case 4: Taking a time horizon of 15 years
To generate Rs 1 crore over 15 years, you need to save approximately Rs 11000 or less per month. Thus, by saving just about Rs 20 lakh during that period, you will be able to achieve your targeted amount. This means that your savings of Rs 20 lakh over 15 years helped you generate an additional wealth of Rs 80 lakh.
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Case 5: Taking a time horizon of 10 years
To generate Rs 1 crore over 10 years, you need to save approximately Rs 30000 or less per month. Thus, by saving just about Rs 36 lakh during that period, you will be able to achieve your targeted amount. This means that your savings of Rs36 lakh over 10 years helped you generate an additional wealth of Rs 64 lakh.
This shows that your savings reduce and wealth grows with an increase in the time period.
