If you are studying in high school or college, chances are you get at least a few thousand rupees as pocket money. Did you know that even if you save a minimal part of this insignificant pocket money, you can easily become a crorepati? That’s because you need to have just two things to become super-rich, namely time and money. Let’s understand how you can become a crorepati through your pocket money.
Even though your pocket money might be an insignificant amount, you have time on your side. You have the advantage of having ample time since you can start investing in mutual funds quite young. The magic of compounding is bound to work in your favour. Simply put, under compounding, your interests earned on mutual fund investments work to create further interest. In short, your interests earn interest on their own. This amplifies the returns on your investment options. If one lets the magic of compounding work for a considerably long time, as in the case of a young person who can remain invested for a long time, one can accumulate immense wealth over the years.
To become a crorepati, one does not require loads of money right away. Even a small amount periodically invested in mutual funds via SIP over a long period will work wonders. SIP, or Systematic Investment Plan is a means to invest in mutual funds online. You can invest in equity mutual funds online via SIP with an amount as low as Rs500 each month. Equity funds are those mutual fund schemes that invest primarily in equities. Such funds invest at least 65% of their corpus in equities and equity-related instruments, giving your money the potential and the power to beat inflation and generate optimally returns over a long term (typically 7 years and more).
Let’s understand this with an example: Say you are 16 years old and get Rs 3,000 as pocket money each month. You try to cut on some expenses and save a small amount each month to invest in equity mutual funds. Equity funds are expected to fetch returns around 12% annually. You continue investing in these mutual funds until you turn 60. For instance, had you invested Rs 1000 each month, at the end of the tenure you would have accumulated around Rs1.9 crores. Even a small amount of just Rs500 per month can turn to a whopping Rs93.5 lakhs over the said duration.
One should not forget to account inflation. Inflation is a phenomenon that decreases the purchasing power of money. However, the fact remains that usually, one does not remain unpaid for their entire life and eventually starts earning on their own eventually. If one keeps growing the SIP amount every year, becoming a crorepati is possible much earlier.
So, while you do the usual things that are considered normal for your age, don’t forget to start something “unusual” like any type of investment such as an SIP. Who knows, it might fetch you something cool someday. Like a Crore. Happy investing!