What will you choose?
Option 1: Take a rupee now which will get doubled each day for 30 days.
Option 2: Take Rs. 5 Crore now
Answer: It pays to be wise with your money and no matter how small the start, it is regular growth that matters.
If you chose option 2, you would lose a cool Rs. 48.5 Crore. A rupee doubled becomes just Rs. 2 the second day, Rs. 4 the third day, Rs. 8 the fourth day and so on. While it seems as if it won’t amount to much, the magic happens on Day 18 when Re. 1 has grown to Rs. 1,31,072. The money now grows at a rapid pace and in the last 12 days, it goes from less than Rs. 1.5 Lakh to around Rs. 53.7 Crore.
It is All about Time and Returns
The lesson here is that no matter how small you start, investing can give you great returns later on, with time. While the going may seem slow for the first few years, the same small corpus can become a handsome pile of cash in later years.
The analogy here, when applied to personal finance, goes like this. It might take 11 years and 6 months for Rs. 5 lakh invested once at an annual rate of return of 10% post tax to reach a sum of Rs. 15 Lakh. For the Rs. 15 Lakh to reach Rs. 25 Lakh (at the same rate of return) will take only slightly more than 5 years.
Don’t Forget Inflation and Compounding
You also need to take into account inflation here. Starting early means that the Rs. 5 Lakh invested 11 years ago is a lot more valuable than Rs. 5 Lakh now. Combining this with compounding means that the amount will grow faster as the years pass.
Baby Steps to Riches
At an early stage most of us do not have the lump sum cash that can show noticeable growth in capital. Small but regular investments ensure that we create the capital required that will give us the really big returns in the years where we might need them the most. A rupee today is more valuable than a rupee tomorrow, but not as valuable as a rupee “invested” today.
Frequently Asked Questions
The value of 5 crores after 20 years depends on the type of investment which will generate revenue and the inflation factor which will directly impact the value of the principal, if we do not consider the growth of principal then the value of 1 crore after 20 years can be only 20 or 25 lakhs.
Earning crore rupees does not come from fixed salary jobs, you need to start your own business and make it grow to reach the crore rupees, it does not mean you must be a business professional to achieve that, your own business can be as simple as making Youtube videos, or to start blogging business. People who found jobs overseas in countries like the US manager to make crore rupees by the end.
The future value is equal to the present value of an investment added to it the value of the interest earned and multiplied by the number of years for with the investment will last. If the present value is 100 USD and the interest rate is 10% per year, then the future value after one year of investment is 110 USD.
To reach one crore in 10 years, you need to invest 44,00 lakhs per month at an interest rate of 12%, it will be easier if you have a more healthy investment mix in your portfolio with low, moderate, and high-risk investment generating different amounts of income to your profile.