Let's see through the story of Ram and Shyam and understand how the starting a SIP early helps the investor using Power of Compounding .
Mr. Shyam started investing in a systematic investment plan investing a sum of Rs. 30,000/- when he was 40 years old. By the time Mr. Shyam reaches 60 years of age, he would have invested Rs. 72 Lakhs and his investment grew on an average rate of 15% per annum.
Now let us consider Mr. Ram who starts out earlier than Mr. Shyam with the one fourth amount , of Rs. 10000/- from the time he was 25 years old or 15 years earlier than Mr. Shyam Mr. Ram's investment growing at the same rate of 15% per annum would end up as high as Rs. 11.41 Cr by the time he is 60 years old.
So while Mr. Shyam invested 4 times more than the Mr. Ram , but the one starting out early has made a substantial gain compared to the one starting out late.
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