Monthly Investing Only ¥100,000 per month for 30 years / Total amount invested 36M JPY
Let’s say you start from scratch, investing ¥100,000 monthly for your longer-term goals, such as financial freedom/retirement.
Assuming that you start at age 30 and continue for 30 years with a compound growth of just 6% per year, by the time you are 60, you will have just over ¥100 million in your nest egg, having invested just ¥36 million over that entire time. The other ¥64 million would have been created by compound interest.
Impressive, isn’t it?
One thing to remember regarding monthly investments is that you need to be patient. The nature of the cost-averaging strategy dictates that it will take time for the compounding to really start showing its full potential.
In the early years, the growth does not seem to happen fast enough, but this is simply because there is not much money in the investment to compound, and by constantly adding more money to the account, you are averaging down the gains.
However, once the investment gains momentum, the growth will accelerate over time. You can see this effect at work in the above graph.
To illustrate how investing more money at the beginning increases the compounding effect, let’s make a simple change to the example above.