Magic of compounding: How Rs 1 lakh can turn into Rs 1 crore if you start early

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When it comes to investing, time matters just as much—if not more—than how much you invest. And nothing illustrates this better than the power of compounding, the process by which your money earns interest, and that interest goes on to earn more interest. Over time, compounding becomes a wealth-building machine.

Let’s take a simple example: You invest Rs 1 lakh at an annual return of 12%, and you let it grow without withdrawing a single rupee. The difference your starting age makes is dramatic.

If you start at age 20, your Rs 1 lakh investment grows almost 100 times to become around Rs 1 crore by the time you turn 60. That’s 40 years of compounding doing its magic, quietly multiplying your money year after year.

Now let’s say you delay this investment by 10 years and start at age 30. The same Rs 1 lakh will grow only about 30 times, reaching Rs 30 lakh by age 60. That 10-year delay cost you a massive Rs 70 lakh in lost potential wealth.

Wait until age 40, and the story is even more sobering. With just 20 years left until retirement, your Rs 1 lakh will grow only 10 times—reaching Rs 10 lakh. Still a decent return, but nowhere near the Rs 1 crore you could have had by starting earlier.

This simple example shows why time in the market beats timing the market. Compounding works best when money is left to grow uninterrupted for long periods. The early years don’t feel like much—your money grows slowly—but toward the end, it accelerates sharply. That’s the compounding curve at work.

The later years deliver exponential gains, but only if you’ve given compounding enough time to build momentum. So, start as early as you can. Even small investments made in your 20s can turn into life-changing sums by the time you retire. The earlier you start, the less you need to invest later. Compounding rewards the disciplined, the patient, and the early birds.

So, if you're in your 20s and wondering whether Rs 1 lakh really matters—just remember, it could one day become Rs 1 crore. Let time and compounding do the rest.