How To Get Rich By 2035: The 3 Most Important Factors That Build Wealth

10 years is a long time period to change your financial status completely, provided you discipline yourself, stick to the strategy and invest in the right products. There are three major things that will decide how much money you will make in a particular time period, say 10 years.  Let's take a look at them one by one.

1. How Long You Stay Invested

As an investor, how much time you give an investment to grow decides the corpus that you will build over time. The longer the time, the higher the accumulation and vice versa.

Suppose an investor invests Rs 10,000 per month at the rate of return of 12 per cent, it  would take 21 years to reach the first one crore.

The investor continued to invest, and this time it took him just 5.5 years to add another one crore to the kitty. This amounts to Rs 2 crore.

Again, the investor continues to invest the same amount, Rs 10,000 per month, at the same 12 per cent returns. He adds another crore in even less time, that is, in about 3 years.

And so on…Notice the pattern here. To create the first 1 crore, it took 20 years, but after that, for every additional crore, it took significantly less time.

This is the power of ‘time in the market’. The number of years an investor stays invested decides how big a corpus they would make. Time allows the compounding effect to kick in when an investor starts earning interest on interest.

This helps the money to grow at a higher pace in the later years. So your time in the market matters if you want to create a bigger corpus.

2. What is the Rate of Return on Your Investments

The higher the returns, the more money an investor will be able to accumulate in a given time period. Suppose an investor invests Rs 10,000 per month for 10 years. The table below shows how much he would earn in 10 years with different rates of return. So, at the rate of 8 per cent, he will accumulate Rs 18.12 lakh. At a higher rate of return of 12 per cent, he will accumulate Rs 22.40 lakh, and at 15 per cent returns, you would be able to accumulate Rs 26.30 lakh.

How much wealth you can build in the next 10 years depends on the rate of return you earn. And, depending on the type of instrument you are investing in, your returns will differ.

For example, the Public Provident Fund offers around 7.1 per cent returns. It's a government-guaranteed instrument with zero risk. A 10-year SBI Fixed Deposit is currently offering a return of 6.05 per cent.

For higher returns, you can look at equity mutual funds. Now, since there are different categories of equity funds, the returns differ widely. For instance, over the last 10 years, large-cap funds which predominantly invest in the largest companies of the country have generated 13.24 per cent returns. The riskier peers, mid-cap funds and small-cap funds have generated 16.23 per cent and 16.45 per cent returns, respectively, over the same time period. The flexible category, flexicap funds, has given 13.75 per cent returns.

If an investor is looking to invest for a long time period of seven years or above, analysts typically suggest that they invest in equity mutual funds. It can help them earn better than fixed deposit returns. However, don’t get swayed by higher return categories. High returns come with high risk.

While equity funds can be a great way to earn higher returns, you must consult a sebi-registered financial advisor to decide which categories of funds may be suitable and in that proportion, depending on your risk profile.

3. How much amount is invested

Like the rate of return, your accumulation is directly proportional to the amount invested. Higher investment means higher accumulation and vice versa. Suppose the rate of return is 12 per cent. Look at the table below to see how your final corpus created at the end of 10 years changes as we change the investment amount.

So, with a Rs 10,000 monthly investment for 10 years, the corpus built is Rs 22.40 lakh. Doubling the monthly investment to Rs 20,000 doubles the corpus as well to Rs 44.80 lakh. Increase the monthly investment to Rs 50,000, and you can become a crorepati in 10 years.

To conclude, your wealth in the next decade will be the result of the choices you start making today. Start early, invest wisely, and let time and discipline do the heavy lifting for you.