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“Time is more value than money. You can get more money, but you cannot get more time.” – Jim Rohn

Rightly said! This is the concept of the “Time Value of Money”…

Many people believe that they can accumulate more wealth by investing more money. This is just partly true. They forget the true power behind the time value of money. A person can accumulate enormous wealth even by investing a small amount if he gives his investments more time to grow.

For example, consider two individuals, Ram and Shyam. Both are of same age. When Ram was 30 yrs old, he started investing Rs.10,000/- per month in a diversified equity mutual fund. If his investments grows @15% p.a., he will have accumulated Rs. 1,32,55,000/- by the time he reaches 50.

On the other hand, Shyam started investing Rs.20,000/- per month in the same scheme at the age 35. By the time Shyam reaches 50, he will have accumulated Rs.1,23,17,000/-.

Investor
Monthly Investment (Rs)
Period
Total Investment (Rs)
Accumulated Value (Rs)
Ram
10,000/-
20 Yrs
24,00,000/-
1,32,55,297/-
Shyam
20,000/-
15 Yrs
36,00,000/-
1,23,17,215/-

It is evident from the above table that even though Shyam invests 50% more money than Ram, his accumulated wealth is less than Ram by the time both reaches the age of 50.

Hence, an investor should start investing early for achieving his financial goals.

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