Impact of 1% Difference
See the significant impact of 1% difference in returns over time. Highlights importance of choosing low-cost investments and beating inflation.
Impact of 1% Difference
Result
How it works
Formula Used
FV₁ and FV₂ using different rates; show difference Compares compound growth at two different return rates
Smart Tips
- 1% difference compounds to huge amounts (10-20% gaps in 30 yrs)
- Shows why fund selection & expense ratio matters
- Beat inflation: target 2-3% above inflation
Best Used For
Choose low-cost funds, understand expense ratio impact
FAQs
How much does 1% extra return actually matter?
Huge. ₹1L initial + ₹50k annual for 20 years: at 8% = ₹32L, at 9% = ₹35L. Difference = ₹3L (9% more). Over 30 years, 1% difference often means 15-25% more wealth. Compounding magic.
Why should I care about expense ratios?
Expense ratio directly reduces returns. If fund returns 10% but charges 1.5% fee, you get 8.5%. Choose funds with <0.5% expense ratio. Over 30 years, ₹1% lower fees = ₹20-30L more in corpus.
Is active fund 1% higher return worth the 1.5% fee?
No. Statistics show 90% active funds underperform index after fees. Even if active fund returns 11%, with 1.5% fee you get 9.5% vs index fund 9.5% with 0.1% fee = 9.4%. Net: similar. Index cheaper.
How do I actually get 1% more return?
Reduce fees (choose low-cost index funds). Rebalance systematically (avoid drift). Time dollar-cost averaging (SIP beats lumpsum). Tax-loss harvest (offset gains). Small gains compound to significant difference.
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