Key to Wealth Creation

Key to Wealth Creation
One of the hazards with my job is that wherever I go I am always on my job. My wife often gets annoyed with me as even in social gathering, I am talking to people something related to my job. And you know what people keep asking me more often in social gathering or otherwise:
1. Where do you think markets are headed?
2. Which is the best mutual fund now days?
3. Can you give us some HOT TIP so that I can double my money in next 6 months?
And when I tell them honestly that I do not know such thing, either they think that I am just stupid who does not know his job or I am not interested in sharing the same to them without fees.
All these questions are asked as people just do not follow the secret rule of creating wealth. The easiest way to become rich is “START EARLY” and let the POWER OF COMPOUNDING work for you.

Secret of Wealth Creation

I did some calculations with 15% return on investments and came up with some astonishing facts and figures. Let’s assume I am touching the age of 30 and I have decided to plan for my retirement at 60. I shall invest Rs.5000 per month in an investment which should give me 15% p.a. return.

Following are some options that I am considering.
1 Invest Rs 5000/- per month and keep investing for next 30 years. Total Investment will be Rs.18,00,000/-
2 Invest Rs.5000/- per month and keep investing for 20 years till the age of 50 but withdraw 10 years after the age of 60. Total Investment will be Rs.12,00,000/-
3 Invest Rs.5000/- per month and keep investing for 10 years till the age of 40 but withdraw 20 years after the age of 60. Total Investment will be Rs.6,00,000/-

Since the total investment in the Option 2 and Option 3 is 2/3rd and 1/3rd respectively of Option 1, the corpus should also be significantly lower. Let’s check it out.

You see the difference in the end corpus does not vary in the same proportion when compared to the investment amount.
Let me explain my point with a different example. I need Rs.2 crore at the time I retire at the age of 60. Now I have again three options.
1. Invest for full 30 years starting from the age of 30
2. Invest for next 20 years and leave the money for next 10
3. Invest for next 10 years and leave the money for next 20
In this case, the gap between option 1 and 3 should be huge. Let’s check it out..

The above two examples just explain us that the KEY TO WEALTH CREATION IS STARTING EARLY.
Let’s take another example which is other way round. This time, I have three options
1. Invest Rs.5000/- per month from the age of 30 for next 30 years.
2. Invest Rs.10000/- per month from the age of 40 for next 20 years.
3. Invest Rs.30000/- per month from the age of 50 for next 10 years.
You know what will be my retirement corpus at age 60?

What if I need Rs.2 crore at the time of my retirement and I again have 3 options
1. Start investing at the age of 30 – The monthly investment will be Rs.3551/- and total investment will be Rs.12,78,461/-
2. Start investing at the age of 40 – The monthly investment will be Rs.15071/- and total investment will be Rs.36,16,981/-
3. Start investing at the age of 50 – The monthly investment will be Rs.76,040/- and total investment will be Rs.91,24,844/-

So now you know Secret of Wealth Creation. Remember “Investments Done in Initial years are the main chunk of your Final Corpus”


  1. Hi Hemant
    I have recently read an article by a financial planner in which she shares her experience which is somewhat similar to your experience. She mentions that whenever she visits USA, even immigration officials at the airports want investment tips from her.
    You have rightly described starting early as key to wealth creation. I would like to add 10 more ground rules for wealth creation.
    1 Identify your goals.
    2 Develop an investment plan to meet your goals.
    3 Examine your risk profile and take appropriate risks.
    4 Research your investments.
    5 Keep it simple and invest in diversified equity mutual funds.
    6 Ignore flavours of the season.
    7 Invest systematically and regularly.
    8 Buy and hold. Investing is a long term proposition.
    9 Do not listen to day to day market commentary.
    10 Do not let your emotions overpower your sense of reason.

  2. Sir.
    I have gone through your article and appreciate your advice. I had myself during my career wrote a similar article in our official newsletter nearly 30 years back suggesting my colleagues to deposit Rs.500/- p.m. in General Provident Fund and get an amount of Rs. 5Lakh plus at retirement saving period being 30 years or so. At that time GPF carried interest rate of 12% P.A. No body believed except a few even though I had given full calculations. Your article needs to cover a little more advising where to get 15% and that too in a safe manner. Secondly we must be advised in periods of impending retirement viz. after 10 years, 20 years, 25 years and so on keeping in view maximum rate of inflation in mind and how much liquid portfolio will be essential to maintain a dignified & decent living since as age increases – so the problems. I am 55+ and nobody was there to advise like you when I started my job in 1976 when salary was meagre just Rs. 400+ but I am keeping my children well informed about this aspect and hope they will start in a positive manner when they start earning themselves. Kindly do carry a comprehensive article for younger generation as they normally start earning at 25 and are conscious of package being offered. People of my age who invested in our children without bothering for our old age ALSO NEED YOUR WISE COUNSEL AT THIS STAGE OF LIFE.

    Yours sincerely,

    Arvind Verman, Ambala Cantt.

  3. Hi Hemant,

    First time commenting here, but I must tell you that am an ardent follower of your blog.

    You gave a hypothetical figure of 15% p.a. for your retirement corpus? How can one achieve this 15% figure — can you suggest an instrument or instruments where one should put this money and the strategy going forward

    Thanks in advance!

  4. The first para made me laugh Hemantji, isn’t it funny when people judge you too fast, sometimes its difficult too.
    Your calculations are very helpful, gives a better picture on impact on the corpus by modifying amount, years or returns. Thanks for sharing.

    • Hi Mansoor,
      These days if someone asks me what you do & if I have little time to explain – I say “You will not understand 🙂 “

  5. It is similar to meeting a doctor in the party and asking for those small sickness, I can understand the frustration of your wife. We Indians(or is it worldwide?) like the “free ka maal”
    But are people really to be blamed. We have not been taught basic financial education in school or college.
    We don’t let anyone drive a vehicle without a license yet allow people to enter
    complex, volatile financial world without any education.

    Financial world is so complex-Stocks, Bond, FD, Post office PPF , Tax.. so many topics. It seems like opening a pandora box.

    Some join forums like tflguide to know more and some keep on looking for free advice 🙂

  6. Hi,

    Great article, and website.
    I’m 30 and want to start investing into a nest egg.

    What do you and the other readers suggest as a good bank account or fund to start with the best interest rates?

    If it makes any difference, I am an NRI.

  7. Hi Veer
    Before starting any investment in India please be clear about the income tax implications.Tax laws are different in different countries. In many countries investment information has to be given to the government before making any investment in India.

    • Hi Anil,

      Thanks for the reply. I’m okay with the tax part of investing; I’m in UAE and there are no such rules etc. For now. 🙂

      So, any suggestions? 🙂


  8. Hi,

    1) you can invest 6k pm in ppf for 15 years and keep renewing for another 15
    2) best is to open a RD in a govt bank like sbi for 30 years if they allow
    any idea?

    • Regarding PPF for NRI’s:
      1. A PPF account opened when the individual was a resident can be operated after becoming a NRI till maturity.

      2.However, at the maturity of the PPF, if the individual continues to be an NRI, the account has to be closed. The post-maturity extension facility is not available to such an account.

  9. Hi Hemant,

    Thanks for posting nice article on ‘Wealth Management’. Agree with you if one has to create wealth, one has to start early. But I have a doubt here, invest 5000/- per month is fine, but where to invest is the challenge and on due course of time where to switch is also another imp factor.

    Could you please clarify my doubt?


    • Hi Alpesh,
      If it is a generic query – feel free to add here. If it is something specific – please hire some advisor in your location.

    • Hi Sweta,
      Not sure if I understood your questions – there are funds available that can give you exposure in international equity.

Comments are closed.