Do you dream of having a whopping how to make 1 crore in your bank account? It might sound like a distant dream, especially when you’re starting small, but the secret lies in a powerful financial tool called compounding. This magical concept can turn your modest savings into a hefty sum over time.
What Is Compounding ?
Compounding is like a snowball effect for your money. It’s the process where your money earns interest, and then that interest earns even more interest. In simpler terms, you not only earn interest on your initial savings but also on the interest that your savings have already earned.
How To Make 1 Crore With Lumpsum investment:
Suppose you at 25 year save 5,00,000 rupees and put it in an investment that offers an annual interest rate of 12%.
Year 1: At the end of the first year, your savings grow by 12%, so you now have 5,60,000 rupees.
Year 2: In the second year, your 5,60,000 rupees earns another 12%, adding 67,200 rupees, making it 6,27,200 rupees.
Year 3: This cycle continues. In the third year, your 6,27,200 rupees grow by 12%, adding 75,264 rupees, making it 7,02,464 rupees.
As the years go by, your money grows not just in linear increments but exponentially, thanks to the power of compounding.
Year 27: Your 5,00,000 rupees grow by 12%, reach at 1,06,62,440. At the age of 52 you got your 1 crore that means it takes 27 Years You make 1 crore.
The true magic of compounding lies in patience and time. Starting early and giving your money more time to compound can make a massive difference.
The Rule of 72: There’s a quick way to estimate how long it will take to double your money with compounding. Just divide 72 by the interest rate per year. For instance, if your investment yields 12% annually, it would take about 6 years (72 ÷ 12) to double your savings.
How To Make 1 Crore With SIP investment:
SIPs are a hassle-free way of investing in mutual funds. Instead of investing a large sum at once, SIPs allow you to invest smaller amounts regularly, typically on a monthly basis. This systematic approach helps inculcate a savings habit while reducing the burden of investing a lump sum.
First to set two plan for making 1 crore
1) Setting a Goal:
To reach your first crore, you need a clear goal and a plan. Let’s consider an example: Suppose you’re 25 years old and aim to accumulate 1 crore by the time you’re 45, giving yourself a 20-year horizon. With SIPs, you plan to invest Rs. 10,000 per month in mutual funds.
2) Choosing the Right Mutual Funds:
Selecting the right mutual funds is crucial. Opt for funds that align with your risk tolerance and financial goals. Diversification is also important, so consider allocating your investments across different asset classes like equity, debt, and balanced funds.
Suppose you at 25 year save 10,000 rupees and put it in SIP investment that offers an annual average interest rate of 12%.
At the age of 47 year age you got your 1 crore rupees that means after 22 years you make first 1 crore.
If your investment offers an annual average interest rate of 15% then, at the age 44 year you make 1 crore rupees means after 19 years you got 1 crore.
Check SIP Calculator
Tips for Maximizing Compounding:
- Start Early: The earlier you start, the more time your money has to grow. Even small amounts can turn into substantial sums with enough time.
- Consistent Contributions: Keep adding to your savings regularly. Even small, consistent contributions can significantly boost your total savings over time.
- Reinvest Earnings: Instead of withdrawing the interest earned, reinvest it to allow your money to grow faster.
- Choose the Right Investments: Different investments offer different rates of return. Research and diversify your investments wisely.
- Stay Committed: Don’t get discouraged by slow initial growth. Compounding accelerates over time, so stay committed to your savings plan.
Also Check: How To Get Retire Earley and Also Rich With the Help of FIRED Rule
Conclusion:
Getting to 1 crore through compounding requires dedication, consistency, and time. It might seem slow initially, but the power of compounding can work wonders, transforming your small savings into a substantial sum. Remember, financial goals are achievable with patience and smart planning. Start small, stay persistent, and watch your money multiply through the remarkable force of compounding!