The majority of investors, perhaps including you, begin their investment journey with enthusiasm. However, after several years, you see little or no movement in their portfolio. Your investment appears stagnant at best. Even though you continue to save each month, it appears as though your net worth has made little-to-no progress.
At this point many of you will question whether the entire process was worthwhile. Or was your time and money wasted? It can feel like you have put in all the time and money to invest, yet compound interest has seemingly done nothing for you.
What most do not recognise about this “flat” period is that it represents an opportunity to get into position in such a way that your money will begin to grow, quickly — what we call a turning point. Unfortunately, it is at this very stage that many investors quit.
Let’s dig into this idea further, and in that context, understand the 7-year rule…
The ‘valley of despair’: Why most investors fail
Investment growth in the initial months and years is often extremely slow.
For instance, you may be doing a ₹5,000 or ₹10,000 monthly SIP, but the increases in your overall investment appear very slow. Your portfolio at this time will mostly be comprised of your own funds rather than profits earned on your investment.
It is during this time when many investors lose confidence. They naively expect compound interest to kick in instantly. However, this phase is simply a “preparation” or “foundation” period; it is the time when your monthly contributions build the momentum for future growth. During these years, nothing significant is occurring. It is normal.
When your money quietly shifts gears
Once you have consistently invested for an extended period, one significant yet powerful process occurs — your returns (not your monthly SIP) begin contributing meaningfully to your wealth.
At some point your portfolio will be sufficiently large that a regular return of 10-12% per annum will result in real, tangible amounts of profit, thereby growing your investment value significantly. Even without the support of fresh instalments.
The jumps in your investment value are now not just ₹1,000… ₹2,000…even ₹3,000 in a single period; they are much more than that.
It is at this stage that compound interest stops being abstract and becomes tangible. Your money will then work as hard or harder than you do. Unfortunately, since this occurs over such a long timeframe, many investors don’t stay invested long enough to realise this benefit.
The mathematics of momentum
The numbers show just how impactful 7 years can be.
Assuming a monthly investment of ₹10,000 @ 12% rate of returns,
- Year 3 (approx.) → ₹4.3 lakhs
- Year 5 (approx.) → ₹8.2 lakhs
- Year 7 (approx.) → ₹13.1 lakhs
- Year 10 (approx.) → ₹23 lakhs
- Year 15 (approx.) → ₹50 lakhs
Do you notice anything? All the hard work and discipline you put into the first 7 years yielded you approximately ₹12 lakh. And then in the next 7-8 years it nearly quadrupled your total. This is why the 7-year mark is so important – your money begins to grow on its own.
Most people quit just before the money takes off
Most people think the first few years of investing are too slow and unproductive — and that’s when most give up. In years 3 to 6, SIPs are either suspended, cut back, or stopped entirely, simply because the growth does not appear to be happening “fast enough.”
This is the absolute worst point in time to quit. It’s like leaving a movie right before the climax.
Reality: The people who remain invested during the slowest, most boring times will be the ones with an explosion of funds at a much later date.
After year 7, your money multiplies, not just adds
The compounding of your wealth is a life-changing event. The more you let your money sit (time), the more it grows. At some point after the first seven years, instead of growing in a straight line, your money will start to curve upwards i.e. grow faster.
Take that same ₹10,000 monthly SIP for example. That ₹10,000 monthly SIP that took seven years to get to ₹13.2 lakhs…will make you an additional ₹37 plus lakhs in next eight years. This is where your wealth finally feels like it’s growing by itself.
You are now receiving the benefit of all your persistent efforts over the last seven years, and your money is going to be working a lot harder than you have ever worked before.
The crossover point: When returns beat contributions
After a few years, your portfolio grows large enough that it earns more than you contribute.
For example: You are contributing ₹10,000 per month (₹1.2 lakhs per annum). However, after ten years your investments have grown to generate ₹1.8 lakhs in one single year – an amount greater than your total contribution for that same year.
This is the dream of every investor: when your money starts working harder than you do.
However, only a few investors achieve this milestone because they have the patience to continue with their investment strategy.
Wealth is built in the years you feel nothing is happening
In the beginning, the process of investing to create wealth feels as though things are moving at a snail’s pace; it is like nothing is going to happen. SIPs accumulate over time, but the numbers hardly excite you.
At this point, it is very likely that many people will stop investing – however, it is also at this time that the basis for building great wealth is developing.
Patience during the “boring” years is the difference between an average investor and one who eventually builds a fortune.
Be consistent with your investment strategy, and eventually you will be rewarded for all of the efforts you put forth long after the initial investment period is completed.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions.