Compounded growth example benefit of starting early

Benefit of starting early - An illustration

The tenure of investment has the biggest impact on wealth building. Therefore, it is most important that the investments are started at the earliest age possible in one's life. Look at the following illustration which compares investments made over time by 2 batchmates who graduated from college together and started their careers around the same time:

PERSON 'A'

PERSON 'B'

  • Starts investing Rs. 25,000 yearly within the first year of graduation.
  • Invests for 10 years and then stops
  • Does not invest anything for 1st 5 years after graduation
  • Thereafter invests Rs. 30,000 yearly (Higher than his friend 'A') for next 30 years

Assuming both of them earned the same return of 12% p.a. on their investment, who do you think accumulated a higher retirement corpus at age 60?

See below for answer....

Compounding Growth Illustration