8 or 80 years - In the life of a Human Being, what is long term?
Posted By: Admin
Time is one the most misunderstood dimensions exposed to humans. A great movie for 3 hours will seem very short, on the other hand, while entering an elevator, the 3 seconds that it takes for the door to close automatically will seem very long. Since time is pliable based on the purpose it serves, it is therefore relevant that one understands the time horizon in the context of the purpose, so that better investment decisions can be made.
In this day and age of shortening technology cycles and rapidly changing paradigms, is long term relevant any more or should long term be looked at as a series of short terms stitched together? While exploring this we came across this computation on Mutual Fund Systematic Investment Plan performance over a few years.
* Corpus is shown in Lakhs
If one stayed invested in a Rs 10K SIP for 10 years, he would make 27.52 Lakhs (on an investment of Rs12 Lakhs), if he stayed invested in two 10 year cycles, he would make 55.04 ( 27.52*2). Whereas, if he continued his 10 year SIP for a further 10 year, that’s when the real magic begins to happen. Instead of 55.04, the number magically changes to Rs 149.72 Lakhs (on an investment of Rs 24 Lakhs).
So I would beg to argue that one long term investment is not just two short term investments stitched together. Especially, for one's long term retirement goals where one is looking at a period of 15, 20 or 30 years as the case may be, don't be in a hurry, let the magic of long term compounding make the LONG TERM WORTH ITS WHILE.
Category Finsherpa | Tags Financial Freedom
