Introduction
Albert Einstein reportedly called compounding the “eighth wonder of the world.” In the context of Indian equity markets, it is your best friend in wealth creation.
What is Compounding?
Compounding means earning returns not only on your original investment but also on the returns generated over time, creating a snowball effect.
Why It Works in India
India’s growing economy and corporate profit growth make it an excellent ground for long-term compounding in equities.
For example, if you had invested ₹1 lakh in Asian Paints 20 years ago, it would have grown to over ₹1 crore today due to consistent growth and dividends.
The Key: Time in the Market
The longer you stay invested, the higher the benefit from compounding. Timing the market is less important than spending time in the market.
Start Early, Stay Consistent
You don’t need a large amount to start. A monthly SIP in quality mutual funds or direct equities can grow significantly over 15–20 years.
Conclusion
The power of compounding, coupled with India’s growth, can help you achieve your financial goals. Start today and let time and patience do the heavy lifting.
