Reaching Rs 1 crore may seem daunting, but the 8-4-3 rule of compounding can simplify the process. This rule highlights the power of compounding over time, specifically targeting a 15-year period to reach the Rs 1 crore milestone.
While initial investments may not show immediate significant returns, patience and discipline in investing lead to substantial growth over time. The secret lies in allowing your money to grow through compounding. But how long does it take to accumulate Rs 1 crore? The duration depends on your investment amount and the returns you achieve, but it's not as difficult as it might initially seem.
According to Sharda Deepakraj Lala - AMFI and IRDA Certified Financial Advisor, Founder of Siddhantha Wealth Managers - compounding involves reinvesting the returns from your initial investment to generate additional earnings. This cycle of reinvestment greatly enhances the value and profitability of your investments over time. Compounding works by allowing your initial investment to earn returns, which are then reinvested to generate even more returns over time.
By adhering to the 8-4-3 rule, you can expedite the growth of your investments. For example, if you invest Rs 20,000 monthly in an instrument yielding a 12% annual interest rate, assuming it is compounded annually, your investment would grow as follows: 1. First 8 Years: The investment accumulates to Rs 32 lakh. 2. Next 4 Years: The same investment amount doubles, adding another Rs 32 lakh, totaling Rs 64 lakh. 3. Final 3 Years: Continuing the monthly investment, the corpus grows to Rs 1 crore.
- Initial Growth (Years 1-8): Steady and consistent growth. Your Rs 20,000 monthly investment grows to Rs 32 lakh. - Accelerated Growth (Years 9-12): Rapid growth, equaling the previous eight years. Your investment amount doubles, reaching Rs 64 lakh. - Exponential Growth (Years 13-15): Continued significant growth, resulting in a Rs 1 crore corpus.
The 8-4-3 rule of compounding offers a strategic method to accumulate Rs 1 crore within 15 years. The duration required to make Rs 1 crore depends on your investment and return rates, but it's more achievable than it may seem. By following the principles of disciplined investing and leveraging the power of compounding, anyone can reach the goal of becoming a crorepati.