Compounding plays a significant role in long-term wealth accumulation. With an average return of 12%, your money grows not just on the principal amount, but also on the interest earned.
Achieving the goal of accumulating a wealth of Rs 15 crore over 30 years may seem daunting, but with smart financial planning, disciplined saving, and the power of compounding, it’s within reach to make one’s retirement comfortable. Here is one of the ways how one can systematically work towards this financial milestone.
The key to building wealth over time is a consistent investment in high-return financial instruments like mutual funds, stocks, or other market-linked investments. By assuming an average annual return of 12% (which is reasonable for equity mutual funds), one can calculate how much money they need to invest each month to reach Rs 15 crore in 30 years.
The power of compounding
Compounding plays a significant role in long-term wealth accumulation. With an average return of 12%, your money grows not just on the principal amount, but also on the interest earned. Over 30 years, even a small monthly investment has grown exponentially.
For instance, after 10 years, your investments of Rs 50,000 per month will have grown to approximately Rs 1.12 crores. After 20 years, the investment grows to approximately Rs 4.6 crore. By the end of 30 years, it will cross the Rs 15 crore benchmark.
This steady growth happens because of the compounding effect, where your returns generate more returns over time.
Strategies to follow
Start early: The sooner one begin with investing monies, the more time their money gets to grow. Even a delay of five to six years can drastically reduce the final retirement corpus.
Diversify: While equity mutual funds can offer high returns, it’s essential to diversify across different asset classes, like debt funds and fixed deposits, to reduce risk. Experts suggest having a balanced portfolio so that they can achieve their financial goals easily.
Stay consistent: Market fluctuations are inevitable, but consistency is key. Stick to your investment plan, and avoid withdrawing your funds prematurely.