Growing the corpus
Compound growth: why starting early beats investing more
Compounding is a slow process that finishes quickly, which is why the timing of the first contribution matters more than its size.
Compound growth means returns are earned on previous returns, not just on the money you put in. Stated that way it sounds minor. The reason it dominates long retirement projections is that the effect is exponential in time but only linear in contribution size, so a year is worth more than a rupee, and the gap widens the longer the horizon.
The comparison that makes the point
Two people invest monthly at the same assumed 12% annual return. One invests half as much, for ten more years.
| Investor A | Investor B | |
|---|---|---|
| Monthly investment | ₹10,000 | ₹20,000 |
| Years invested | 30 | 20 |
| Total paid in | ₹36,00,000 | ₹48,00,000 |
| Projected corpus | ₹3.05 Cr | ₹1.82 Cr |
Investor A pays in ₹12 lakh less and finishes with roughly ₹1.2 crore more. The extra decade did work that no realistic increase in contributions could match. This is the entire argument for starting before you feel ready, and it is why the years-to-retirement input moves a projection more than any other.
Where the money in a long projection comes from
In Investor A’s ₹3.05 crore, only ₹36 lakh (under 12% of the total) is money that passed through their hands. The rest is growth on growth. That ratio is worth internalising, because it reframes what the plan is sensitive to: over long horizons the projection depends far more on your assumed return than on your contribution, which is exactly why the return assumption deserves scrutiny rather than optimism. See choosing return and inflation assumptions.
The Investment Growth Calculator separates these two components explicitly (total invested versus estimated growth) along with a growth multiple, so you can see the split for your own numbers rather than taking a general claim on trust.
Lump sums and SIPs are not the same shape
A lump sum compounds for the entire period. A monthly SIP does not: the contribution made in month 240 compounds for no time at all, and the average rupee in a 20-year SIP has been invested for roughly ten years. This is why ₹24 lakh contributed through a SIP over 20 years finishes well below ₹24 lakh invested as a lump sum at the start, at the same rate.
It also explains a common misreading. A SIP is not underperforming when its final value falls short of a lump-sum projection. Most of its money has simply been in the market for less time. The two are answers to different questions: what do I do with money I have now, and what do I do with money I earn later.
The Investment Growth Calculator models both together, adds each month’s contribution at the end of that month, and applies any one-time investment at the start of its year so it compounds for the remainder of the projection.
Top-ups: the small setting with a large effect
A SIP top-up raises the monthly amount at the start of each new year, modelling contributions that rise with income. Because the increases land early enough to compound, a top-up that tracks your salary growth typically closes a shortfall far faster than a one-off increase made later on. If your projection falls short of the target, this input is usually a more realistic lever than raising your assumed return.
What the projection does not include
- Uneven returns. The calculator applies the same rate every period. Real returns arrive unevenly, and while that does not change the arithmetic of a pure accumulation projection much, it changes things a great deal once you begin withdrawing.
- Tax and fees. Expense ratios, transaction costs and tax on gains all reduce the outcome, and none is modelled.
- Purchasing power. The projected corpus is in future money. To judge what it will actually buy, discount it by inflation. See planning for inflation.
- Interruptions. A thirty-year projection assumes thirty years of uninterrupted investing, which few careers actually deliver.
Related guides
Try it with your own numbers
More guides in the Retirement Learning Centre, and common questions in the retirement planning FAQ.
This guide is educational and general. It is not financial, investment, tax or legal advice, and it takes no account of your circumstances. Every figure quoted is an illustration produced by the arithmetic described, not a forecast or a guarantee. Investment returns, inflation and market conditions are uncertain and will differ from any assumption used here. See the full disclaimer.