Disciplined long-term investing can make even a single lump-sum amount produce meaningful wealth. With that in mind, let us see how Rs 2 lakh can grow when left to compound over different time horizons.
Mutual funds, especially those that are equity-oriented, are considered one of the best methods to grow money over a long period of time. Let's break down the numbers at an annual return assumption of 12%.
Rs 2 Lakh In 15 Years
At an annual rate of return of 12% over a 15-year period, there would be some room for compounding to work. Though a single lump sum may not be enough to reach Rs 1 crore, growth would be substantial nonetheless.
Lump sum investment: Rs 2,00,000
Tenure: 15 years
Expected rate of return: 12% per annum
Estimated returns: Rs 8,94,713
Maturity corpus: Rs 10,94,713
This may well be short of the crorepati mark, but the money nevertheless grows by more than five times because of compounding.
Rs 2 Lakh In 20 Years
When you expand the horizon to 20 years, your corpus starts to accelerate. Compounding becomes more visible in the last few years, as the money invested keeps multiplying.
Lump sum investment: Rs 2,00,000
Tenure: 20 years
Expected rate of return: 12% per annum
Estimated returns: Rs 17,29,258
Maturity corpus: Rs 19,29,258
Even though Rs 1 crore remains a distant target, your gains grow almost 10 times over the invested amount.
Rs 2 Lakh In 25 Years
At 25 years, long-term equity compounding starts showing its true potential.
Lump sum investment: Rs 2,00,000
Tenure: 25 years
Expected rate of return: 12% per annum
Estimated returns: Rs 32,00,012
Maturity corpus: Rs 34,00,012
While Rs 1 crore still remains out of reach even over 25 years, the wealth creation is substantial, with the investment multiplying over 17 times.
Can Rs 2 Lakh Become Rs 1 Crore?
Yes, but not without either a higher return, a longer horizon of around 35 years or by adding regular SIPs and annual top-ups to increase the overall investment.
The above numbers show that time is the biggest driver of wealth creation. If one wants to reach the goal of crorepati faster, try combining a lump sum with a SIP and small yearly top-ups in order to steadily increase the corpus.
But remember that mutual funds come with market-related risks. So, one needs to approach the same after considering all such factors.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
