Power of Compounding For Women: How To Grow Wealth With Small Investments, Explains Expert

Building wealth doesn’t always require big investments, sometimes, it’s the small, consistent steps that make the biggest difference. The power of compounding allows your money to grow steadily over time, turning even modest savings into meaningful wealth. Compounding is when your investment earnings begin to make their own earnings, essentially your money starts working for you. So, if you’re new into investing, women can try this method to increase their wealth over time. 

To know about this in detail, we spoke to Monica Malik aka Pretty Much Finance, Finance Content Creator and Founder of Madly Famous, for the expert insights. In this article, we’ll explore what compounding means, why it matters especially for women, and how you can start growing your money smartly:

What Is Compounding?

Compounding is one of the most powerful concepts in finance. It means you earn returns not only on the money you invest, but also on the returns that money has already earned.Over time, this creates a snowball effect and small amounts can grow into big wealth. Monica Malik explains that ‘Time Is Your Biggest Advantage’ when it comes to compounding.

In simple terms: the earlier you invest, the more time you give those returns to grow. Even modest sums, invested wisely, can expand significantly over time.

Here’s a simple example:

Let's say you invest ₹10,000 at 10% interest per year.

Year 1: You earn ₹1,000. Total = ₹11,000 

Year 2: You earn 10% on ₹11,000 = ₹1,100. Total = ₹12,100 

Year 3: You earn 10% on ₹12,100 = ₹1,210. Total = ₹13,310

Why Does It Matters For Women?

Women often face unique financial challenges: career breaks, pay gaps, longer life expectancy and sometimes a later start to investing. Leveraging compounding becomes a powerful tool to bridge some of those gaps.

Monica Malik notes that many women underestimate the impact of starting small, but small investments consistently and early is far more effective than large sums invested too late. 

By focusing on time and regularity rather than timing the market, women can build their financial freedom.

Don't miss: How To Get Started In Real Estate Investment: A Step-By-Step Guide - Money Matters

How To Start With Small Investments?

• Set a regular habit: Choose a fixed amount you can invest each month even ₹5000 to ₹10,000 will do if you start early.

• Choose growth-oriented assets: Stocks, equity funds or diversified investment plans tend to yield higher returns over long time periods, these earnings feed the compounding engine.

• Reinvest dividends and gains: Instead of spending your returns, reinvest them so your pot grows and compounds faster.

• Be consistent: Funding your investments every month matters more than getting the best investment. 

• Review but don’t panic: Occasionally review your portfolio and ensure it aligns with your goals, but avoid reacting to day-to-day market ups and downs.

Don't miss: What Is NIFTY - Meaning, Features, Benefits, And How It Is Calculated: Money Matters

Timeline Advantage

The real magic happens when you give compounding years to work. Malik advises, “Time is your best friend in investing. Someone who invests early, even with small amounts, can end up with more than someone who invests a large amount later. A 25-year-old who invests ₹5,000 per month until age 35 and then stops can still end up richer by age 60 than someone who starts at 35 and invests till 60.”

Even if you’re starting later, small regular investments still make a difference, the key is to start now and stick with it.

Note: Always conduct your own research and consult a financial advisor before making investment decisions.

For more such stories, stay tuned to HerZindagi. 

Image credit: Freepik