Mansi: “Raju bhai, Himanshu and I were reviewing our mutual fund portfolio last night, and we’re quite concerned. Over the last two years, growth across our schemes has been really low. Should we change our schemes to ones showing better performance?”
Himanshu:“Exactly. Other funds in the market seem to be posting better numbers right now. If our current schemes aren’t delivering high growth, shouldn’t we shift our money where the returns are?
Raju: “I completely understand your anxiety, but switching funds based on short-term performance is one of the most common wealth-destroying traps investors fall into. At Arthashastra, we always remind investors to return to the fundamental math of wealth creation—the compound interest formula.”
Raju draws a simple equation on a notepad:
FV = PV (1+r)^t
Raju: “In this formula, FV represents future value, PV is the principal amount you invest, r is the rate of return, and t is time. Most investors spend all their energy chasing . They switch funds constantly, trying to capture a slightly higher return. But here is the reality: ris driven by macroeconomic cycles, market sentiment, and global events. It is entirely outside an investor’s control.”
Mansi: “If we can’t control the rate of return, what should we focus on instead?”
Raju: “You must focus on the two variables that are entirely within your control: P and t. P is the persistent amount you invest through regular SIPs, and is the time horizon you give those investments to grow. Notice that t sits as an exponent in the formula. That exponential power is where true wealth is created—not over two years, but across decades.”
Himanshu: “Decades sound like a long time, especially when markets go through bad patches. Doesn’t volatility ruin the growth?”
Raju: “Not if you give it enough time. Look at the history of the BSE Sensex. When it started in 1979 with a base value of 100, India faced major contingencies—the 1991 balance-of-payments crisis, the 2000 dot-com crash, the 2008 global financial crisis, and the 2020 pandemic. Despite all those disruptions, if we see the bigger picture the Sensex grew from 100 in 1979 to over 76,000 points today, compounding at roughly 14–15% annually over four decades & growing 760 times; eg. 1 lakh invested in 1979 would have grown to 7.6 crores now.”
Mansi: “So people who panicked and exited during those flat or down years missed out on massive wealth.”
Raju: “Precisely. The stock market often stays flat for two or three years before making sudden leaps upward. Investors who constantly jump schemes end up buying high and selling low. Wealth is built by consistently investing persistent amounts (P) and granting your investments the decades (t) required for compounding to work its magic.”
Himanshu: “So two quiet years aren’t a reason to abandon our strategy?”
Raju: “Not at all. Stop worrying about market-driven returns you cannot control. Focus on what you can control: stay disciplined, increase your investment amount when your income grows, and let time do the heavy lifting.”