The title seems to be a calculating mistake or some kind of an exaggeration. But when we talk about the Indian stock markets and its returns, these quants seem to be digestible. One can easily amass a gigantic corpus of Rs 1 crore if you invest only Rs 15K per month. Lets’ discuss the rule of 15x15x15 and the compound interest mantra behind the success of investment king “Warren Buffet”.
The magic of compounding and the statement title can be easily explained with the help of an example further. Assume an investor is investing Rs 15000 per month for 15 years and generating 15% rate of returns. This will result in the accumulated wealth of Rs 1.00 crore (Rs 1,00,27,601). SIP Calculator. Not only this, as per compounding principle, if we apply the same returns and same contribution for 15 more years
i.e. 30 years in totality, the amount which an investor will accumulate increases further exponentially. The rule 15*15*30, as they call, helps you accumulate Rs 10.38 Crore (Rs 103849194). SIP Calculator. Double the time period with doubling the investment amount but the return is tenfold.
This is the power of compounding. As per the rule, if one invests Rs 15000 per month via SIP in equity mutual fund that generates an average 15% returns, the investor is likely to become a Crorepati. The total investments for 180 months of Rs. 15k each turns out to be Rs 27 lakhs. The periodic investments generate the profit of Rs 73 lacs.
Similarly, if the young investor increases the period by another 15 years, the wealth increases 10 times. Thus, amount invested in 30 years is Rs 54 lakhs i.e. Rs 15000 for 360 months and the Profit earned above investments is Rs 9.84 Crore.
This effect clearly says the earlier the better. The sooner one starts investing; the more wealth one can accumulate with time. Love begets love, similarly, money begets money, and its progeny can generate more. Compounding gives a multiplier effect to the invested amount whereby the initial capital gets interest for the first year, and in subsequent years, even the interest becomes the principal for the upcoming years which generates more interest in addition which makes it more powerful and lucrative.
To conclude, we can say that, compounding is a long-term strategy. VSRK suggests mutual funds because of the features such as flexibility of switching from category to other, redemption at any time if required, a high degree of transparency, and most importantly, the simplest means to play in the equity market. To take advantage of compounding, all you can do is to start investing in the early years of life.