Money Moves from Active to Patient in the Stockmarket

"Our stay-put behaviour reflects our view that stock market serves as a relocation center at which money is moved from the active to the patient."

Warren Buffett 

Gift Your Child Financial Freedom!

Actual Question:

Hello Anand. I agree that mutual funds cannot be looked at for short term. But is it practical to set a term horizon for 30–50 years? Most of us young professionals in late twenties/early thirties would be 60–80 years old by that time. So is mutual fund only applicable for retirement planning or can we realise goals in 10–15 years?

Answer:

Dear Friend!

Good results will certainly be produced in 10–15 years. There is no doubt about it. But the spectacular compounding benefits will only be produced after 30 years. Please read the article Miracle of Compounding to understand why it is so. 

Therefore, the best takeaway from this discussion is a parent can invest for the children a lump sum of say Rs.1,00,000/- at the time of birth and by the time the child grows-up to about 35 years the corpus will be so huge that the child (now a grown-up) is financially free. 

Can there be any better gift a parent can give?

Thank you,

With Best Regards

Anand