Compound growth is calculated using the formula:
FV = P × (1 + r/n)^(n×t) + C × [((1 + r/n)^(n×t) - 1) / (r/n)]
Where:
- FV = Future Value
- P = Initial investment
- C = Recurring contribution (monthly SIP)
- r = Annual interest rate (in decimal)
- n = Number of compounding periods per year
- t = Time in years
The key to compound growth is reinvesting your earnings, allowing your money to grow exponentially over time. Even small monthly SIPs can lead to significant wealth accumulation over long periods.
Investment Tips for India
- Equity Mutual Funds: Historically delivered 12-15% CAGR over long term (10+ years)
- PPF: Offers tax-free returns (current rate ~7.1%) with EEE tax benefits
- FDs: Interest taxed as per income slab, better for conservative investors
- NPS: Additional ₹50,000 tax deduction under Section 80CCD(1B)
About Tax Treatment
LTCG (Long Term Capital Gains) tax applies after 1 year for equity (10% above ₹1 lakh) and 3 years for debt funds (20% with indexation).
STCG (Short Term Capital Gains) tax applies for shorter durations (15% for equity, slab rate for debt).