When we start our long term wealth creation journey, we ussually focus on ‘how much should I invest’ but the factor that is more crucial is, ‘when should I start’. As delaying investment even by few year can make a difference of crores. Thanks to the power of compounding!
Let's take the example of Aman, Rahul and Rohit to illustrate the difference
Aman starts early. At the age of 25, he starts investing a merger amount of ₹5000 in Mutual Fund Systematic Investment Plan (SIP) and continues to invest till 60. Assuming 12% interest in his investment, Aman build a corpus of ₹2.75 crore - where his total investment is ₹21 lakh and estimated returns are ₹2.54 crore
Rahul, meanwhile, starts at 30, and invests the same amount in MF SIPs for the next 30 years. At the age of 60, at the same interest rate, he creates a corpus of Rs1.54 crore, by intesting net ₹18 lakh and earning a return of Rs1.36 crore
Rohit delays his investment and starts his SIPs at 35. To compensate it, he invests double the amount— ₹10,000 per month—but only until the age of 60, giving him 25 years of investing . At the same assumed return of 12%, his final corpus stood at around ₹1.7 crore - ₹30 lakh invested, ₹1.4 crore came as return.
Why does this happen?
The reason is simple: the power of compounding rewards time more than money.
And another factor that works here is rupee cost averaving. SIPs follow a simple rule—you invest a fixed amount regularly, no matter whether the market is up or down. When prices are low, you buy more units, and when prices are high, you purchase fewer units. Over time, this helps balance your overall purchase cost, which is called rupee cost averaging.
But if you delay starting your SIP, you lose those early of compounding, where the impact on long term corpus is significant.
How Rahul and Rohit could have compensated for the delay?
Step-up method: Increasing the investment amount by a certain percentage every year as income increases can enhance long term accumulation without a sudden rise in investment outflow
Lump sum investments: In case of a bonus or have idle savings, they could have made an lump sum payments into their existing mutual fund scheme to compensate for lost units
The lesson is clear: in investing, starting early beats starting big. Because wealth creation is not just about how much you invest—it is about how long you stay invested.
