Money will double every five years; Here's how according to Raamdeo Agrawal

Agrawal cited Warren Buffett as a perfect example of the power of compounding.

When it comes to investing, index funds will see the benefits of power of compounding and be able to weather all market storms, according to veteran investor Raamdeo Agrawal. He was speaking at Motilal Oswal's Passive Fund Conclave on March 20.

Agrawal added, "No matter the market storms, every five years, your money will double. Over time, passive investing will outperform active managers, and those who stick with it will emerge as the biggest winners—without the hassle."

Agrawal stressed that compounding is crucial for financial planning, across all fund types. He illustrated this with a simple example. “If you invest 1.5 lakhs with an annual return of 15% over ten years, using the Rule of 72, we know that money doubles every five years. In ten years, it will double twice: Rs 1.5 lakhs becomes Rs 3 lakhs, then Rs 6 lakhs,” he explained.

He compared compounding to a bridge to the future. "If you know how fast something is compounding, you can estimate its future which is important,” he explained

Agrawal cited Warren Buffett as a perfect example of the power of compounding. “Buffett attributes his success to two things: being born in America and understanding the power of compounding,” he noted adding that "Mr. Buffett has mastered the power of compounding. Right now, at 94 years old, if he lives another 15–20 years, Berkshire Hathaway could grow into a $10–12 trillion company in his lifetime. This is the power of compounding.," he added.

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