What to do with the first salary?
Investing early, even with a small portion of your salary, can lead to significant financial security by the time you retire. The Nifty50 Index Fund, which tracks India’s top 50 companies, is an excellent choice for beginner and experienced investors alike. Let's explore how starting with your first salary and retiring at 58 can shape your financial future.
Assumptions for the Calculation
- Start investing at your first salary, regardless of age.
- Retirement age: 58 years.
- Initial investment: 5% of the monthly salary.
- Annual increment in investment: 1% of the initial monthly salary per year.
- Average annual return: 10% (compounded monthly).
- Example salaries: ₹20,000 and ₹50,000.
Example 1: Starting Salary ₹20,000
Investment Plan
- Monthly investment at start: ₹1,000 (5% of ₹20,000).
- Increment in investment: ₹200 per month each year (1% of salary).
Wealth Accumulation by Age
| Age | Monthly Investment (₹) | Total Invested (₹) | Wealth Accumulated (₹) |
|---|---|---|---|
| 28 | 1,000 | 12,000 | 12,701 |
| 38 | 3,000 | 3,60,000 | 6,92,933 |
| 48 | 5,000 | 9,00,000 | 24,34,264 |
| 58 | 7,000 | 18,00,000 | 66,22,574 |
Example 2: Starting Salary ₹50,000
Investment Plan
- Monthly investment at start: ₹2,500 (5% of ₹50,000).
- Increment in investment: ₹500 per month each year (1% of salary).
Wealth Accumulation by Age
| Age | Monthly Investment (₹) | Total Invested (₹) | Wealth Accumulated (₹) |
|---|---|---|---|
| 28 | 2,500 | 30,000 | 31,752 |
| 38 | 7,500 | 9,00,000 | 17,32,333 |
| 48 | 12,500 | 22,50,000 | 60,85,659 |
| 58 | 17,500 | 45,00,000 | 1,65,56,434 |
Key Insights
Starting Early Pays Off:
Even if you start investing later in life (e.g., at 28), consistent contributions make a massive difference over 30 years.Incremental Growth Amplifies Returns:
A modest annual increase in contributions ensures your investment keeps pace with your growing income and inflation.Long-Term Compounding Is Powerful:
In both examples, your wealth grows exponentially in the later years. This demonstrates the magic of compounding.
Why Choose Nifty50 Index Funds?
Low Risk:
Investing in India’s top 50 companies spreads risk across sectors.Cost-Effective:
Index funds have lower fees compared to actively managed funds.Ease of Investment:
SIPs make it easy to automate monthly contributions.Proven Performance:
Over decades, Nifty50 has consistently delivered strong returns, making it a reliable choice for long-term wealth building.
How to Get Started
- Open an Investment Account: Choose a broker or app to begin.
- Set Up a SIP: Automate monthly contributions to maintain discipline.
- Stay the Course: Avoid panic during market fluctuations.
Conclusion
Whether your first salary is ₹20,000 or ₹50,000, investing 5% with a modest yearly increment ensures you retire with financial security. Starting at 28 with consistent investment until 58 could provide you with ₹66 lakh to over ₹1.65 crore. That’s the power of starting early, staying consistent, and leveraging compounding through a Nifty50 index fund.
(Only for Educational purposes)