Early Bird Gets the WORM

June 9, 2018

Karan & Kabir, are two young people who started working pretty much at the same time. Almost the same day. Earned very similar amounts as well. 

While Karan was a city boy who had friends and buddies from school, college and work with whom he spent time over the weekends. Much as he tried, his habits, friends and lifestyle did not allow him too much to spare. So, for the first 10 years, between 21 to 30 years he saved nothing. 

 

Kabir on the other hand came from a smaller town into the big city for his job, hence he did not know many people and stayed focussed to his work, the only other indulgence was to go with his roommates to a movie and lunch one weekend a month. He ensured that out of his 20K salary, he saved 4K every month from the day he started earning, till his age of 30 years. So, he was able to save Rs 4.80 L.

 

At the age of 30, Karan felt that since he had done no saving at all for the past 10 years he needs to start the savings (same 4000) and continued the same for 30 years more, i.e. ended up investing Rs. 14.40L (up to his age of 60). Kabir in the meanwhile got married and post marriage his savings were taken up by EMIs and other forms, relevant to the family. 

 

At the Age of 60, assuming both had invested in Mutual Funds with same performance (12% per annum) this is how their portfolio would appear:

 

KARAN: Invested Rs 14.40 Lakhs ​- Got Rs ​139.79 Lakhs​

 

KABIR: Invested Rs 4.80 Lakhs ​- Got Rs 275.00 Lakhs​

 

Kabir in fact got ​2 times more money in spite of investing three times lesser amount than Karan. Simply because he started earlier and his money got more time to compound. Sometimes we over complicate investing. Simply put its about allowing enough time for your investments to mature, the more the better. 

 

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