What Happens If I Invest ₦25,000 Every Month in Mutual Funds for 10 Years?
This question comes up almost every week.
Someone will say, I can only afford to invest ₦25,000 every month. Is it even worth it? I don't think that amount can make any difference."
My answer is always the same.
You are looking at the ₦25,000.
I am looking at the 10 years.
That is where both of us are different.
Most people think investing is about putting a lot of money into the market. It is not. Investing is more about giving your money enough time to grow than putting in a huge amount all at once.
Let me explain what I mean.
Suppose you decide that from this month, you will invest ₦25,000 every month in a mutual fund. You do not miss any month. You do not stop because somebody says the market is down. You simply keep investing every single month for the next ten years.
That means every year, you would have invested ₦300,000. After ten years, you would have contributed ₦3 million from your own pocket.
Now let us see what happens.
After the first year, you have invested ₦300,000. If your mutual fund earns around 15% in that year, your investment may be worth around ₦325,000.
Some people will look at that and say, "That is not plenty."
And they are right.
The first year is usually the hardest because your money has not had enough time to grow. This is where many people give up. They expect a miracle after twelve months. Investing does not work like that.
You continue.
Another ₦25,000 goes in this month.
Another ₦25,000 goes in next month.
You keep repeating the same thing.
By the end of the second year, you would have invested ₦600,000. Your investment could now be worth around ₦705,000.
Do you know what has happened?
The money you invested in the first year is still working. The money you added in the second year has also started working. Now both of them are making money together.
That is why investing becomes more interesting as time goes on.
By the end of the third year, you would have invested ₦900,000. Your investment could now be worth about ₦1.15 million.
For the first time, you look at your account and realise that your investment has crossed one million naira even though you have not personally invested one million naira.
By the end of the fourth year, you would have invested ₦1.2 million, while your investment could now be worth around ₦1.66 million.
By the end of the fifth year, you would have invested ₦1.5 million, but your investment could have grown to around ₦2.25 million.
This is where many people finally understand what compounding means.
Let me explain it in a simple way.
Imagine you employ ten people to work for you. At the end of the year, each of them brings you some profit.
The following year, you do not only have those ten people working for you. The profit they made has also joined them to work for you.
That is exactly what compounding does.
Your money makes profit.
Then that profit also begins to make more profit.
Then the new profit also begins to make more profit.
That is why people who start early usually end up much wealthier than people who wait.
By the end of the sixth year, you would have invested ₦1.8 million, while your investment could now be worth around ₦2.93 million.
By the end of the seventh year, your total contribution would be ₦2.1 million, while your investment could have grown to around ₦3.71 million.
By the end of the eighth year, you would have invested ₦2.4 million, while your investment could now be worth around ₦4.62 million.
By the end of the ninth year, you would have contributed ₦2.7 million, while your investment could have grown to about ₦5.66 million.
Then you reach the tenth year.
You have invested ₦3 million from your own pocket.
But your investment could now be worth around ₦6.85 million.
Take a moment and think about that.
You did not save almost seven million naira.
You saved three million naira.
The remaining money came because you allowed time to work for you.
Now let me tell you something that many people do not know.
Mutual funds are managed by professional fund managers. They do not manage your money for free.
Every mutual fund charges a management fee. Depending on the fund, this is usually around 1% to 2% every year. You do not need to bring out your ATM card to pay this fee because it is already deducted before the fund announces its returns.
There is also something called Withholding Tax, or WHT.
If the mutual fund pays interest or dividend income, 10% Withholding Tax may be deducted from that income before it is paid to you, depending on the type of fund and the current tax rules. It does not mean the government takes 10% of everything you invested. It only applies to the qualifying income.
You should also know that not every mutual fund is the same.
A Money Market Fund is suitable for people who want lower risk and easier access to their money.
An Equity Mutual Fund invests mainly in shares and has the potential to give higher returns over the long term, but its value can go up and down.
A Balanced Fund combines both shares and fixed income investments, so it tries to give you growth while reducing risk.
Now let me ask you one simple question.
If you can spend ₦25,000 on things you may not even remember next year, why can't you invest ₦25,000 every month to build wealth for your future?
You do not need to be rich before you start investing.
Most people become rich because they started investing.
The biggest mistake is not choosing the wrong mutual fund.
The biggest mistake is waiting for the perfect time.
Start with what you have.
Okay let me ask you..
If you knew that consistently investing ₦25,000 every month could potentially grow into almost ₦7 million in 10 years, would you start investing this month?
Or do you still think ₦25,000 is too small to make a difference?
Tell me your answer in the comments. I would really like to know how you see it.
#investing #financialfreedom #wealthbuilding
This is financial education, not investment advice. Always do your due diligence before investing.