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Example:

Starting with Rs 10000/- monthly investment through SIPs starting at age of 25 Vs Rs 30000/- monthly investment at age of 40.

The below example describes clearly as to how compound interest helps you build a higher corpus by starting to invest small amount early on in career Vs starting to invest big later on in life.

The formula for Compound Interest is A = P (1+R)^ N where:

A= Amount on maturity
P= Principal amount invested
R= rate of interest in %
N= no of years

Example: Rishi & Rohan invest Rs 20 lakh &10 lakh each. Rishi sells his investments after 10 years & Rohan sells his investments after 20 years. The difference in the value of their investments is a staggering Rs 34 lakhs despite Rishi investing twice as much as Rohan. This is known as the “Power of Compounding”.

So it’s important to focus on N (no of years) & give a longer time for your money to grow through the power of compounding rather than just focusing on P (investment amount).