₹5,000 Monthly for 25 Years – See How Much You Can Earn!

The return on an investment primarily depends on where the money is allocated. If the investment period exceeds five years, isn’t it reasonable to take on some level of risk?

After all, only by doing so can one generate returns that surpass inflation and the rising cost of living.

Table Of Contents:

• Investment Plans

• ₹5,000 Monthly: How Different Investments Can Shape Your Future

• The Rule of 114: A Simple Way to Evaluate Investments

• Invest ₹5,000 Per Month for 25 Years: How Much Will You Accumulate?

• Final Takeaway

Investment Plans

When we talk about investment plans, what options come to mind? Savings accounts, fixed deposits, bonds, debt mutual funds, stock market investments, and equity-linked mutual funds are among the primary choices.

Since these operate under a regulated framework and involve a calculable degree of risk, one can strategically invest in them based on individual financial goals.

On the other hand, stock trading, as well as futures and options trading, are extremely high-risk ventures. Should small investors consider them at all?

Perhaps not, as data from SEBI suggests that nearly 90% of participants in such investments face losses.

Additionally, unregulated schemes like cryptocurrency without a strong foundation or Ponzi schemes should be avoided.

However, for those who still wish to explore such high-risk investments, wouldn’t it be wise to limit their exposure? Ideally, one should allocate no more than 5% of their total investment portfolio to such ventures.

For instance, if an individual has a total investment of ₹10 lakh, they may consider investing up to ₹50,000 (5%) in high-risk options. But is it truly worth the gamble?

₹5,000 Monthly: How Different Investments Can Shape Your Future:

What if someone diligently invests ₹5,000 every month for 25 years? The potential returns could vary significantly depending on the investment avenue chosen.

Let’s explore how different options could shape long-term wealth accumulation.

Some individuals prefer absolute safety, keeping their savings in a bank account. Over 25 years, this disciplined saving would amount to ₹15 lakh.

Assuming an annual interest rate of 3%, the total corpus would grow to ₹22.36 lakh. But is this the most effective way to grow wealth?

Now, consider investing the same amount in a debt mutual fund. With an expected annual return of 8%, wouldn’t the outcome be far more rewarding?

Indeed, the corpus would expand to ₹47.87 lakh—comparable to what a fixed deposit might offer.

What if, instead, the investment were directed towards gold savings or a Gold ETF? With an assumed annual return of 9%, the total wealth would rise to ₹56.48 lakh. Doesn’t this highlight the immense potential of well-planned investments?

Let’s assume an investor contributes ₹5,000 every month into an index mutual fund that tracks NIFTY or Sensex.

If this investment yields an average annual return of 12%, the total corpus accumulated over 25 years would be approximately ₹94.88 lakh far exceeding the ₹47.87 lakh that a fixed deposit might offer.

The Rule of 114: A Simple Way to Evaluate Investments:

Now, consider a scenario where the same ₹5,000 is invested each month in an actively managed equity mutual fund for the same duration of 25 years.

Assuming a higher average annual return of 15%, the accumulated corpus would grow to around ₹1.64 crore.

A 25-year investment horizon is undeniably long-term. In such cases, taking calculated risks with equity-based funds can potentially outpace inflation and significantly enhance wealth accumulation.

But how do we determine if an investment is truly rewarding?

A general benchmark is that a good investment should ideally triple in value over a decade. But how long does it take for an investment to triple?

The Rule of 114 provides a quick estimation. Simply divide 114 by the annual return percentage to determine the number of years required for an investment to triple.

Formula:
Years required for investment to triple = 114 / Annual Return Percentage

Wouldn’t it be insightful to use this rule to evaluate different investment opportunities?

If an investment yields an average annual return of 12%, it will triple in approximately (114/12) 9 years and 5 months—essentially, around 10 years.

This means that for an investment to grow threefold in a decade, it should generate an average annual return of 12%. Now, let’s take a look at the BSE Sensex.

A decade ago, the index stood at 25,000 points, and today, it has surged past 75,000 points before experiencing a slight correction. Doesn’t this indicate that the Indian stock market has delivered solid returns?

However, while evaluating investment growth, one critical factor must not be overlooked—inflation.

A high inflation rate erodes the purchasing power of money over time. So, how do we measure its impact? There’s a simple formula: divide 70 by the inflation rate to determine the number of years it takes for money’s value to halve.

With India’s average inflation rate at 7%, the purchasing power of money is halved in 10 years. Let’s break it down with an example: Suppose someone invests ₹5 lakh in market-linked instruments.

In 10 years, the investment triples, reaching ₹15 lakh. However, with 7% inflation, the real value of ₹5 lakh drops to ₹2.5 lakh in the same period.

So, adjusting for inflation, the ₹15 lakh investment effectively holds a real value of ₹7.5 lakh.

This still represents significant wealth creation. But what if the return were only 7.2% per annum? In that case, the investment would have merely doubled to ₹10 lakh, barely outpacing inflation.

This underscores a crucial investment lesson: earning returns that exceed inflation is essential for wealth preservation and growth. Are your investments keeping up?

Invest ₹5,000 Per Month for 25 Years: How Much Will You Accumulate?

Investment Plan	Interest Rate / Annual Return	Total Corpus After 25 Years
Bank Savings Account	3%	₹22.36 Lakhs
Debt Mutual Fund / Fixed Deposit	8%	₹47.87 Lakhs
Digital Gold	9%	₹56.48 Lakhs
Stock Market – Nifty / Sensex Index	12%	₹94.88 Lakhs
Aggressive Equity Mutual Fund	15%	₹1.64 Crore

If the inflation rate reduces by half (7%), the investment value would approximately be ₹5 lakh (₹10 lakh/2).

In other words, since the interest income and inflation rate were equal, the investment’s real value did not increase.

So, isn’t it crucial to assess the impact of inflation before making any investment? How long will it take for the investment to double or triple?

These are key considerations for making profitable financial decisions. Otherwise, wouldn’t one be forced to take loans just to keep up with rising costs?

Final Takeaway:

Investing is not just about setting aside money—it’s about making it work for you. As we’ve seen, different investment options yield vastly different results over 25 years, with inflation playing a critical role in real wealth accumulation.

The key takeaway? Always aim for investments that outpace inflation while aligning with your risk appetite. Whether you choose equity, mutual funds, or safer options like fixed deposits, the goal should be financial security and growth.

So, are your investments positioned to build real wealth over time?