In today's fast-paced lifestyle, building wealth is usually considered a slow and steady journey. But only a few investors understand how they can turn even modest investment into a fortune over a period of time, with the power of compounding.
A highly-recommended way to do this is through mutual funds that have emerged as an increasingly popular method to accumulate long-term wealth. Overall, there are two common ways through which people can invest in mutual funds: systematic investment plans (SIPs) or lump sum.
While SIPs require investors to put a fixed amount at regular intervals promoting discipline and reducing the impact of market volatility, a one-time lump sum investment can get them higher returns. This is because of high compounding due to the initial boost in base investment. However, it does carry higher risk due to market timing.
Can Rs 13 Lakh Lump Sum Generate Rs 12 Crore Corpus?
At first glance, reaching Rs 1 crore might seem like a distant dream to many investors. But even when you set aside a lump sum of Rs 13 lakh today and let it grow without any further contributions, there are chances to transform it into a staggering Rs 12 crore. This is only possible through disciplined investing in growth-oriented assets, particularly equities.
A key highlight here is the power of compounding that ensures that investors get generate more returns. Staying invested for a long period allows the corpus to grow steadily, despite any ups and downs in the market.
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How It Works?
Assuming someone invested a one-time lumpsum of Rs 13 lakhs into a mutual fund, here's what their corpus may look like over different time periods:
1. 10 years
Invested amount: Rs 13,00,000
Investment duration: 10 years
Expected rate of return: 12%
Estimated returns: Rs 27,37,602
Total value: Rs 40,37,602
2. 20 years
Invested amount: Rs 13,00,000
Investment duration: 20 years
Expected rate of return: 12%
Estimated returns: Rs 1,12,40,181
Total value: Rs 1,25,40,181
3. 30 years
Invested amount: Rs 13,00,000
Investment duration: 30 years
Expected rate of return: 12%
Estimated returns: Rs 3,76,47,898
Total value: Rs 3,89,47,898
4. 40 years
Invested amount: Rs 13,00,000
Investment duration: 40 years
Expected rate of return: 12%
Estimated returns: Rs 11,96,66,261
Total value: Rs 12,09,66,261
This shows how the secret lies in patience as well as the exponential nature of compounding, where returns generate further returns and create a snowball effect that accelerates wealth creation with each passing year.
Overall, the journey remains dependent on the rate of return achieved, time period and investor's ability to stay invested. While 30 to 40 years might sound a long wait to many, it is precisely this long-term perspective that separates extraordinary outcomes with the usual ones.
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