Ramdev Agrawal said that investing in index funds can double the money in 5 years. The power of compounding will give excellent returns in the long term. He advised investors to be patient and invest for the long term.
Ramdev Agarwal said that index funds have the ability to withstand the onslaught of the market.
Highlights
New Delhi. Have you seen Phir Hera Pheri? In that film, a company named Lakshmi Chit Fund makes a false claim that it will double the investors' money in a few days. Now a veteran investor has said something similar. Motilal Oswal Chairman Ramdev Agarwal has said that investors' money can double in 5 years. However, he has not asked to invest this money with him but has shared a common idea with people which anyone can use. He has advocated index funds and said that these funds can withstand any market volatility due to the power of compounding and can give excellent returns in the long term.
According to Ramdev Agrawal, investors investing in index funds will get great benefits in the long term. He said, "No matter what market crash comes, your money will double every five years." He stressed that the effect of compounding is so strong in the long run that passive investing will outperform most active fund managers.
A simple example of compounding
Agarwal explained compounding through a simple calculation. Using the "Rule of 72", he explained that if an investment is getting 15% return annually, then dividing 72 by 15 gives us the answer of 4.8, which indicates that the money will double approximately every 5 years.
If a person invests Rs 1.5 lakh and gets 15% annual return, then:
In the first 5 years, Rs 1.5 lakh will grow to Rs 3 lakh.
In the next 5 years, this Rs 3 lakh will grow to Rs 6 lakh.
In this way, an investment of just Rs 1.5 lakh will become Rs 6 lakh in 10 years.
Buffett's secret of success: Compounding
Ramdev Agrawal described compounding as a "bridge to the future". He said that if someone understands the speed of compounding, then he can easily predict the future. He linked the power of compounding to Warren Buffett's success. Agrawal said, "Buffett attributes his success to two things - being born in America and understanding compounding." He also said that Buffett is 94 years old, and if he lives for another 15–20 years, his company Berkshire Hathaway can reach 10–12 trillion dollars.
What can investors learn?
According to Ramdev Agrawal, investors should understand the power of passive investing and compounding. Only maintaining investment for a long time and using opportunities correctly can give big returns. He advised investors to be patient, take advantage of compounding and invest in index funds for the long term. This is the easiest and safest way to earn big profits from the stock market.
