Power of Compounding: How an extra 2% return can boost your corpus from Rs 1.7 crore to over Rs 3 crore
Discover the power of compounding and how an extra 2% annual return can grow your investment significantly. Learn how small increases in returns lead to large wealth gains over time.
The power of compounding can turn even small differences in returns into significant wealth over time. A 1% or 2% extra annual return may seem minor, but over the long term, it can result in substantial gains. For example, a monthly investment with 12% returns can grow to Rs 3.08 crore, while a 14% return can create Rs 4.5 crore. Learn how compounding works in fixed interest rate schemes and mutual funds, and how to maximise your wealth.
Introduction to the Power of Compounding
- Small differences in returns can have a massive impact over time.
- A 1% or 2% extra return may seem minor but leads to huge differences in corpus value over a long period.
What Are Compound Returns?
Compound returns are returns earned on both the initial principal and the accumulated returns.
Compounding in Fixed Interest Rate Schemes
Investors earn interest on both their initial investment and the interest accumulated over time.
Monthly Investment Example: Rs 25,000
Scenario 1: 12% Annual Returns for 20 Years
- Expected Maturity Amount: Rs 2.3 Crore
- Total Investment: Rs 60 Lakhs
- Wealth Gain: Rs 1.7 Crore
Scenario 2: 14% Annual Returns for 23 Years
- Expected Maturity Amount: Rs 4.5 Crore
- Total Investment: Rs 69 Lakhs
- Wealth Gain: Rs 3.8 Crore
Compounding explained
- Just a 2% higher return and 3 extra years of investment can turn Rs 2 crore into Rs 4.5 crore.
- The power of compounding amplifies wealth growth over time.
Disclaimer:
The above figures are projections and not investment advice. Please consult a financial advisor for detailed planning.