“Whether I should invest for long-term or short-term”, you must have questioned yourself or asked experts. Will a larger amount invested for a shorter period help accumulate a larger sum, or will a small investment made for the long term accumulate a bigger corpus? In this article, we answer this and more such questions.

Investing ₹2,000 For 20 Years vs ₹20,000 For 5 Years

If you are under the impression that an investment of ₹20,000 for 5 years will make more money than ₹2,000 for 20 years, you may want to rethink that. There is no guarantee that a higher principal invested for a shorter period will give higher returns than a smaller amount invested for a longer tenure. Let’s understand this with an example.

Amit invests ₹2,000 per month for 20 years at an expected rate of return of 12%, accumulating ₹19,98,296 at the end of the tenure. His total investment over the 20 years amounts to ₹4,80,000, with an estimated return of ₹15,18,296.

On the other hand, Sumit invests ₹20,000 per month at the same rate of return but for a shorter duration of 5 years. His accumulated returns are ₹16,49,727, with a total investment of ₹12,00,000, resulting in an estimated return of ₹4,49,727.

Conclusion

While your instincts may have led you to believe that investing a larger sum for a shorter period would yield greater returns than the other way around, the reality is quite different. The example demonstrates the power of compounding over time, making long-term investments more fruitful, even when the initial amounts are smaller.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.