From ₹20,000 a month to Rs 18 lakh: Here's how index funds turn discipline into long-term wealth

Investing in index funds is often described as boring — and that may be precisely why it works. 

With low costs, broad diversification and returns that closely track the market, index funds have long been favoured as a simple, long-term wealth-building tool. Yet many investors abandon them early, mistaking slow initial progress for failure. 

Chartered Accountant Nitin Kaushik, in a recent post on X (formerly Twitter), highlighted this behavioural gap by breaking down what actually happens when disciplined monthly investments meet time — especially in the crucial first five years. 

Silent years of compounding 

“Most people don’t quit investing because compounding doesn’t work. They quit because compounding is invisible in the beginning,” Kaushik wrote. 

Using realistic assumptions — index fund returns of 11-12 per cent annually and consistent monthly investments — he demonstrated how early efforts often feel disproportionately large compared to visible gains. 

For instance, investing ₹10,000 a month amounts to ₹6 lakh over five years. At the end of this period, the portfolio value typically reaches around ₹8-8.5 lakh. While the ₹2 lakh-plus gain is meaningful, it rarely feels dramatic enough to keep investors motivated. 

“This is compounding warming up, not performing,” she noted. 

Momentum builds with consistency 

As the monthly investment rises, the psychological shift becomes clearer. 

At ₹15,000 per month, a five-year contribution of ₹9 lakh can grow to roughly ₹12-13 lakh. At ₹20,000 per month, ₹12 lakh invested may turn into ₹17-18 lakh. 

The key change is not the absolute number, Kaushik stressed, but behaviour. Returns begin to “catch up” with contributions, creating momentum and trust in the process. 

“This is where investing stops feeling like sacrifice and starts feeling like structure,” she wrote. 

5-year tipping point 

According to Kaushik, the real transformation begins after the five-year mark. Annual gains start resembling annual investments — a milestone many investors never reach because they exit too early. 

“The first phase of investing tests patience. The second phase builds trust. After that, compounding becomes visible enough to change behaviour,” he said. 

This, he argues, explains why seasoned investors often sound unexciting. They are not chasing returns but protecting a process that already works. 

Why index funds suit long-term investors 

Index funds remain a popular foundation for portfolios due to several structural advantages: 

• Low costs: Passive management results in lower expense ratios, allowing investors to retain more returns. 
• Broad diversification: Exposure to multiple companies reduces dependence on any single stock or sector. 
• Market-linked performance: By tracking indices, these funds offer stable, long-term growth that often rivals or beats active managers. 
• Simplicity and transparency: Clear holdings and predictable behaviour make them beginner-friendly. 
• Tax efficiency: Low portfolio turnover leads to fewer capital gains distributions. 
• Emotion-free investing: Rule-based investing removes human bias and emotional decision-making. 
• Automatic rebalancing: The fund adjusts itself to mirror index changes, eliminating the need for constant intervention. 

Quiet wealth, lasting stability 

Index funds, Kaushik concluded, do not create overnight success stories. Instead, they steadily build financial stability — and stability, over time, compounds faster than excitement. 

“Compounding doesn’t announce itself loudly,” he wrote. “It arrives slowly — in calmness, confidence, and choices made without pressure.” The message is simple: start small, stay consistent, and let time do the heavy lifting.