Compounding doesn’t behave like a straight line. It behaves like a snowball that gets heavier and faster. A latest FundsIndia report shows that if you invest Rs 30,000 per month at an assumed rate of 12%, the first Rs 50 lakh takes 8 years and 3 months to build, while the final Rs 50 lakh, from Rs 4.5 crore to Rs 5 crore, accumulates in just 10 months. Even the move from Rs 4 crore to Rs 4.5 crore takes only 11 months.
Even more revealing is how the source of each Rs 50 lakh tranche flips completely. Early on, most of the Rs 50 lakh comes from your contributions, while later, nearly all of it comes from returns.
Consider this: for the first Rs 50 lakh, 59% came from the investor’s contributions (Rs 29.5 lakh) and 41% from investment returns (Rs 20.5 lakh). By the second Rs 50 lakh (moving from Rs 50 lakh to Rs 1 crore), the proportions flip, with about 71% coming from returns (Rs 35.5 lakh) and 29% from fresh investment (Rs 14.5 lakh).
Fast forward to the last Rs 50 lakh (from Rs 4.5 crore to Rs 5 crore), and only 6% (Rs 3 lakh) was new money, while 94% (Rs 47 lakh) was pure returns. Those shifts are the textbook outcome of compounding: as the base grows, returns increasingly feed on themselves and dominate future wealth creation.
The timing difference underscores the same point. It takes a long time and steady discipline to reach the first big milestone, 8 years and 3 months for the first Rs 50 lakh, because you are still building the base. Once that base is large, the same percentage returns deliver much larger absolute gains. That is why later Rs 50 lakh blocks can arrive in months, not years. The journey is often slow at the start and blazingly fast toward the end.
There is also a behavioral lesson in these percentages. New investors, frustrated by a slow start, may be tempted to give up or chase high-risk quick fixes. But the chart shows the opposite. Patience plus consistency is the real lever. The investor who keeps contributing early supplies the fuel for compounding; time and market returns do the rest. By the time your corpus is big, you are reaping the exponential fruit of earlier discipline.
The practical takeaways are straightforward: start as early as possible, maintain disciplined contributions, and remember that the first years matter disproportionately. Finally, track progress not just by absolute returns but by the share of gains coming from contributions versus returns. When returns begin to dominate, you have entered the high-gear phase of compounding.
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