This is the story of Kumar. He drives a taxi. Earns Rs 17000 per month. He is 30 yrs old. His monthly expense is Rs 15000. He is most willing to invest in a SIP. A SIP of Rs 2000 per month for 35 years will ensure that he does not have to do physical work after the age of 65.
The power of compounding at 12% will assure him the same lifestyle he leads today, for a period of 23 years.But if he does an SIP in FD @ 6% his retirement corpus would last him for just 10 years. Thus the 6?ditional return that a balanced fund should generate, will provide Kumar his current lifestyle for an additional 14 years. There are several such Kumars around. Instead of donating some money for them, educate them and make them start a SIP. All one has to do is to invest some “time” in such work. This would be much better than any other kind of social work because a little donated money would get spent in no time but the SIP would provide them 14 additional years of living. Needless to say, the Power of Compounding as Albert Einstein said is the 8th wonder of the world.