Early Investing - Ram and Shyam Story - Sita and Gita story - time is Money

http://www.bemoneyaware.com/blog/journey-to-wealth-start-early/


Let’s take the case of two brothers Ram and Shyam, 25 years old.

• Ram sets aside Rs 1,000 a month and puts it in an investment that earns 10% per annum.
• After 5 years, Shyam begins investing Rs 2,000 a month in same investment .

At the end of 10 years, value of their investment is as follows :

	Ram’s		Shyam
Year	Amount Invested	Value of Investment	Amount Invested	Value of Investment
1	12,000	13,200	0	0
2	12,000	27,720	0	0
3	12,000	43,692	0	0
4	12,000	61,261.20	0	0
5	12,000	80,587.32	0	0
6	12,000	101,846.05	24,000	26400
7	12,000	125,230.66	24,000	55440
8	12,000	150,953.72	24,000	87384
9	12,000	179,249.10	24,000	122522
10	12,000	210,374.00	24,000	161174.64

By year 10, both Ram and Shaym have invested the same amount, but the value of Ram’s investment is more than that of Shyam’s.

Let’s take another example of Sita and Gita.

• Sita invests Rs 1,000 a month in an investment that earns 10% per annum. She stops after 4 years.
• At that point, Gita begins investing Rs 1,000 a month on the same investment and continues to do it for the next 6 years.

At the end of 10 years, value of their investment is as follows :

	Sita		Gita
Year	Amount Invested	Value of Investment	Amount Invested	Value of Investment
1	12,000	13,200	0	0
2	12,000	27,720	0	0
3	12,000	43,692	0	0
4	12,000	61,261.20	0	0
5	0	67,387.32	12,000	13,200
6	0	74,126.05	12,000	27,720
7	0	81,538.66	12,000	43,692
8	0	89,692.52	12,000	61,261.20
9	0	98,661.78	12,000	80,587.32
10	0	1,08,527.95	12,000	101,846.05

Despite the fact that Gita invested more money (6 * 12,000 = 72,000) that Sita (12,000 * 4=48,000), Sita still has a larger investment value than her. And think how much more Sita would have if she didn’t stop investing.