30 Years of Compound Interest Mathematics
Discover the real power of compounding over 30 years. Compare how ₹1 invested in Bank FD, Gold, Real Estate, and Reliance Industries grows with CAGR calculations. Learn which investment gives the highest return and why most investors underestimate long-term compounding.
Introduction: The Shock of 30 Years
Most people underestimate what money can do over three decades. When we think of ₹1, it feels too small. But when compounded for 30 years, the results can be shocking.
Let’s take a simple case: if you invested just ₹1 in 1994, how much would it be worth in 2024? Would you believe that the results range from ₹10 to ₹389 depending on where you invested?
This article will break down the mathematics of compounding using four common options:
- Bank Fixed Deposit (FD) at 8%
- Gold with CAGR of 10.38%
- Real Estate with average CAGR of 10%
- Reliance Industries stock with CAGR of 22%
At the end, you will understand why Albert Einstein called compound interest the eighth wonder of the world.
Concept 1: Bank FD – The Safety Net with Limited Growth
- Initial Investment: ₹1
- CAGR (FD Rate): 8%
- Value After 30 Years: ~₹10.06
Bank FDs are considered the safest investment for most Indians. The mathematics is simple:
Future Value (FV) = Present Value × (1 + r)^n
Here:
- PV = 1
- r = 8% (0.08)
- n = 30 years
So, FV = 1 × (1.08)^30 = 10.063
That means ₹1 turns into ₹10.06. On the surface, a 10X return looks attractive, but when you compare it with inflation, gold, or stocks, the real picture looks disappointing.
FDs protect your capital but limit your growth. Over 30 years, inflation eats into your purchasing power, so the actual wealth creation is almost zero in real terms.
Concept 2: Gold – The Timeless Asset
- Initial Investment: ₹1
- CAGR: 10.38%
- Value After 30 Years: ~₹19.35
Gold has always been considered a hedge against inflation. Its long-term CAGR is around 10.38%.
Using the same formula:
FV = 1 × (1.1038)^30 ≈ 19.35
So, ₹1 becomes ₹19.35. That’s almost double what FD gives.
Gold is not just an investment but also a cultural asset in India. Families keep gold for weddings, security, and as an emergency fallback. However, while it outperforms FD, it still cannot beat high-growth assets like equities.
Concept 3: Real Estate – The Indian Dream
- Initial Investment: ₹1
- CAGR (Average): 10%
- Value After 30 Years: ~₹17.44
Real estate has been one of the most popular asset classes for Indians. Historically, property prices have given 8–12% CAGR depending on location. Taking an average of 10% CAGR:
FV = 1 × (1.10)^30 ≈ 17.44
So, ₹1 becomes ₹17.44.
Real estate creates wealth through both price appreciation and rental income. However, it has high entry cost, maintenance, and liquidity challenges. Compared to FD, it’s better. Compared to gold, it’s similar. Compared to equities, it’s far behind.
Concept 4: Reliance Industries – The Power of Equity
- Initial Investment: ₹1
- CAGR: 22%
- Value After 30 Years: ~₹389.75
This is where the magic of compounding truly explodes.
Reliance Industries has delivered a staggering 22% CAGR over 30 years.
FV = 1 × (1.22)^30 ≈ 389.75
So, ₹1 becomes nearly ₹390!
This means Reliance outperformed FD by almost 38 times, gold by 20 times, and real estate by 22 times.
This is the power of equities: they reward investors for patience and risk-taking.
Comparative Summary Table
|
Asset Class |
CAGR |
Value of ₹1 After 30 Years |
Multiple Growth |
|
Bank FD |
8% |
₹10.06 |
10X |
|
Gold |
10.38% |
₹19.35 |
19X |
|
Real Estate |
10% |
₹17.44 |
17X |
|
Reliance Stock |
22% |
₹389.75 |
389X |
The Mathematics of Compounding Explained
Compounding means your money earns interest, and then that interest itself earns interest. Over time, this snowball effect creates massive growth.
The formula:
FV = PV × (1 + r)^n
Where:
- PV = Present Value (₹1)
- r = Rate of return (CAGR)
- n = Number of years (30)
The difference between 8% and 22% CAGR might look small in a single year, but over 30 years, it changes everything.
- At 8%, ₹1 → ₹10
- At 22%, ₹1 → ₹390
That’s the hidden power of exponential growth.
Why Investors Underestimate Compounding
- Linear Thinking: People expect returns to grow in a straight line, not exponentially.
- Short-Term Focus: Investors panic during market corrections and exit too early.
- Inflation Blindness: They ignore that inflation reduces the real value of FD and property returns.
- Lack of Patience: Few people stay invested for 30 years in the same asset.
Psychological Lesson: Small Starts Create Big Results
Imagine if instead of ₹1, you invested ₹1,00,000:
- FD: ~₹10 lakh
- Gold: ~₹19 lakh
- Property: ~₹17 lakh
- Reliance Stock: ~₹3.9 crore
The difference is life-changing. That is why equity investing creates wealth in the long run.
Conclusion: My Mathematics Is Blown Away
When I look at these numbers, my mathematics is shaken.
- Bank FD looks safe, but it barely beats inflation.
- Gold and property preserve value but don’t multiply it fast enough.
- Equities like Reliance transform ₹1 into nearly ₹390.
So, my math is clear: long-term wealth is created only through equities.
👉 The real question is: Have you also been making the same mistake by avoiding equity investments for safety? Think again before you miss the next 30-year compounding journey.
YOUR VILASHNANDAN 🙏🙏